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May 19, 2020 |
Aerospace and Related Technologies Update – Spring 2020

Click for PDF This May 2020 edition of Gibson Dunn’s Aerospace and Related Technologies Update discusses newsworthy developments, trends, and key decisions from 2019 and early 2020, including the impact of COVID-19, that are of interest to companies in the aerospace, defense, satellite, and drone sectors as well as the financial, technological, and other institutions that support them. This update addresses the following subjects: (1) commercial unmanned aircraft systems (“UAS”), or drones; (2) the commercial space sector; and (3) recent government contracts decisions involving companies in the aerospace and defense industry. _____________________

Table of Contents

I. Unmanned Aircraft Systems
A. Expanding Drone Applications During a Global Pandemic B. UAS Integration Pilot Program (IPP) and Advancements in Drone Delivery C. FAA Proposes Remote Identification Requirement for Drones D. Continued Uncertainty Surrounding Low-Altitude Airspace E. Proposed Rules for Operations at Night and Over People F. New Regulations for Hobbyists
II. Space
A. Space Agencies Around the World Seek Major Milestones B. NASA Embraces Partnerships with the Commercial Market C. Creation of Space Force D. Internet Satellites E. A Year of Serious Investment in Space
III. Government Contracts
A. Armed Services Board of Contract Appeals Cases B. Civilian Board of Contract Appeals Cases C. Court of Federal Claims Cases D. Federal Circuit Court of Appeals Cases
_____________________

I.   Unmanned Aircraft Systems

A.   Expanding Drone Applications During a Global Pandemic

As discussed below, and in prior yearly updates, many corporations have been exploring the use of drones to perform delivery services. The global COVID-19 pandemic, however, may result in an explosion of demand for drone delivery and other drone applications. With people across the country quarantined, the concept of drone delivery of essential supplies has never been more appealing. For many, a trip to the grocery store, pharmacy, or doctor’s office can be life threatening due to the risk of contracting or spreading COVID-19. Under these circumstances, having medications delivered by drone or medical tests flown to a lab—all without the need for social interaction—could be lifesaving. To date, however, government rules and regulations in the United States have prohibited the majority of drone deliveries other than in experimental programs. Although government approval of drone delivery progressed in 2019, the steps were incremental. We expect that the pandemic will provide new context for lawmakers and regulators to consider policy that permits and even promotes commercial drone delivery, and prompt the adoption of policies that will allow drone delivery to become an essential function. Governments around the world are using drones amid the COVID-19 crisis in a variety of novel ways to reduce risk to their constituents and government employees. Within a quarantined society, drones are able to go places, see things, and carry items without violating a shelter-in-place order. And drones can also provide safe ways for governments to monitor citizens’ compliance with quarantine rules. COVID-19 has ushered in a new era of drone applications. In China, drones have become an important tool in managing the pandemic. Drone mapping software and thermal sensors have been adapted to address disease detection and assist with crowd management.[1] Drones used for spraying crops have been repurposed to spray disinfectant across large areas, which allows for much faster spraying, less human risk, and coverage in locations beyond human reach. Drones have also been modified to carry loudspeakers and flood lights to enforce quarantines without putting government employees at risk. In addition, drones have transported medical equipment when traditional transportation was not practical.[2] Beyond China, other countries, including Spain, Kuwait, and the UAE, have used drones to help impose quarantines.[3] In the United States, although drones have not yet been widely adopted in response to COVID-19 as noted above, there are several reports of their limited use. For example, the city of Elizabeth, New Jersey has been using drones equipped with sirens and speakers as a tool to enforce social distancing.[4] Unofficial drones from a self-proclaimed “Anti-COVID-19 Volunteer Drone Task Force” have been spotted in Manhattan making announcements for people to maintain proper social distancing.[5] And in Connecticut, Draganfly and the Westport Police Department are conducting “pandemic drone” test flights with technologies reportedly capable of detecting temperature, heart and respiratory rates, as well as detecting sneezing and coughing in crowds from a distance of 190 feet.[6] Due to potential privacy concerns, the Westport Police Department said that the drones will not go into private yards and do not employ facial recognition technology.[7] As the COVID-19 consequences extend, United States localities may increase their drone usage for managing various aspects of the crisis in line with other countries. The continued use of drones in innovative ways during the COVID-19 crisis will likely increase public support for commercial drones and may lead to more favorable regulations. In a few short years we expect that this technology will have transformed from a novelty into an essential tool for responding to pandemics and similar crises.

B.   UAS Integration Pilot Program (IPP) and Advancements in Drone Delivery

The Unmanned Aircraft Systems Integration Pilot Program (“IPP”) was created in 2017 to form the basis of a new regulatory framework to safely integrate drones into the national airspace.[8] The IPP seeks to balance the “benefits of innovation” against “the need to protect national security, public safety, critical infrastructure and the [National Airspace System].”[9] The IPP operates through unique private/public partnerships at a local level, and in 2018, the Federal Aviation Administration (“FAA”) selected 10 localities to be part of the pilot program.[10] These 10 localities achieved multiple firsts during 2019, several of which are highlighted below, leading to advancements in police use of drones as well as drone delivery. In March 2019, the FAA granted the Chula Vista, California Police Department a Certificate of Authorization (“COA”) which allows the operation of drones beyond visual line of sight up to three miles in any direction from the launch site.[11] This was the first time that the FAA issued a COA with a “beyond visual line of sight” provision for public safety. The Chula Vista Police Department plans to use the COA as a means for enabling drones to arrive on emergency scenes to gather information prior to putting first responders in harm’s way.[12] In addition to the IPP-enhancing applications for public safety, test data from the Virginia, North Carolina, and San Diego IPPs resulted in the FAA opening the door for certain companies to begin commercial drone deliveries. In April 2019, Wing, the drone-delivery unit of Alphabet, secured the first Part 135 Air Carrier Certification ever issued to a drone company.[13] In reliance upon test data from its involvement in the Virginia IPP, Wing was granted approval to carry and deliver packages commercially in parts of southwest Virginia, and obtained limited approval to fly drones over people and beyond the visual line of sight. Customer deliveries in Christiansburg, Virginia began in October 2019.[14] In June 2019, the FAA issued a Special Airworthiness Certificate to Amazon Prime Air, which allows it to research and test one of its unmanned platforms for delivery. Amazon is waiting to obtain a Part 135 certificate. Further, Uber also recently confirmed that it applied for a Part 135 Certificate for drone delivery, and it made several test deliveries to San Diego State University as part of the San Diego IPP.[15] In October 2019, UPS, based on data from the North Carolina IPP, obtained for its subsidiary, Flight Forward, a full Part 135 Standard certification to operate a drone airline, including beyond visual line of sight.[16] UPS’s first flight transported medical samples to testing labs—an application particularly useful during a global pandemic—and UPS Flight Forward is now routinely using drones to deliver medical lab material across a large medical complex.[17]

C.   FAA Proposes Remote Identification Requirement for Drones

On December 31, 2019, the FAA published its long-awaited proposed rule that would create a system to track and manage every UAS flight by requiring remote identification of UAS within United States airspace.[18] The proposed rule would tie the existing registration requirements[19] to the new remote identification requirements by requiring nearly all UAS to connect to a “remote ID service” network to be managed by private companies.[20] Among the chief benefits cited by the FAA are improved situational awareness for other aircraft in the vicinity and the potential for UAS operations over people, at night, and beyond the operators’ visual line of sight—operations that are not currently allowed without an exception, and for which the FAA has made clear that remote identification would be a prerequisite.[21] Under the proposed rule, UAS operating in domestic airspace would be divided into three classifications:
  • Standard remote identification – UAS capable of both connecting to the internet and broadcasting directly from the UAS.[22]
  • Limited remote identification – UAS capable of connecting to the internet but not broadcasting directly from the UAS. These UAS will be limited to operations within the operators’ visual line of sight.[23]
  • No remote identification – UAS without remote identification equipment will be permitted to operate only in FAA-recognized identification areas and within visual line of sight of the operator. The first of these areas to be approved will likely be in locations where traditional radio-controlled model aircraft are regularly flown.[24]
The FAA envisions that the “vast majority” of UAS will be either standard or limited remote identification UAS, while the residual category will apply to amateur-built aircraft and UAS manufactured prior to the effective date of the proposed rule.[25] Public reaction to the proposed rule has been decidedly negative, with many commenters voicing concerns about privacy and financial costs.[26] More than 52,000 public comments were submitted by the March 2, 2020 deadline.[27] One critic notes that private suppliers would be able to charge annual subscription fees and decries the fact that the proposed rule would ground thousands of UAS that are incapable of connecting to the internet.[28] As an alternative, this critic suggests that UAS utilize existing broadcast technologies for remote identification such as Wi-Fi and Bluetooth, which would arguably be just as effective, free, and cut out the need for any middlemen.[29] Another commenter notes the proposed rule would likely end his UAS mapping business.[30] The National Business Aviation Association (“NBAA”) welcomed the proposed rule and commended the FAA for taking the initiative to require remote UAS identification.[31] NBAA’s Doug Carr characterized the proposed rule as “a foundational document for moving forward with integrating not just UAS, but other emerging technologies, in a way that addresses our industry’s collective safety, security and other objectives.” The NBAA thanked the FAA for issuing its proposed rule and stated that it “look[s] forward to working with the FAA and other stakeholders to secure its adoption.”[32] The Aircraft Owners and Pilots Association has withheld judgment and indicated that its analysis is ongoing and a statement of position will be forthcoming.[33] For its part, the FAA believes its proposal, though more costly, is also “more complete” than broadcast-only alternatives.[34]

D.   Continued Uncertainty Surrounding Low-Altitude Airspace

It has been almost four years since comprehensive regulations for drones weighing 55 pounds or less became law under Part 107 of Title 14 of the Code of Federal Regulations. Although Part 107 created a federal regulatory framework for commercial drone operations, there is still significant confusion as to what constitutes a legal flight under evolving state and local laws. Although the industry has continued to advance, little progress has been made in clarifying who controls low-altitude airspace. It remains unclear as to how much, if any, airspace is owned by private landowners and whether states and municipalities have any jurisdiction over low-altitude airspace. The confusion stems from the FAA-deemed “myth” that the FAA does not control airspace below 400 feet in light of its position that it controls the airspace “from the ground up.”[35] However, many state and local governments, as well as property owners, do not agree with the FAA’s interpretation. The starting point of federal airspace has many implications, and the question ultimately will be settled in the federal courts. To date, this boundary has not been directly addressed by a court in the context of drones. The closest that federal courts have come to addressing this issue was in July 2016 when U.S. District Judge Jeffrey Meyer, of the District of Connecticut, provided dicta in one opinion. In that case, Judge Meyer questioned the FAA’s position: “[T]he FAA believes it has regulatory sovereignty over every cubic inch of outdoor air in the United States . . . . [T]hat ambition may be difficult to reconcile with the terms of the FAA’s statute that refer to ‘navigable airspace.’”[36] The dicta addressed the question of where the FAA’s authority begins, but noted that the “case does not yet require an answer to that question.”[37] In time, a case will require such an answer. Without clarification, legal compliance and enforcement will be uncertain in most areas and may be impossible within some localities. This legal uncertainty remains one of the most significant barriers to large-scale commercial operations. While the federal courts provide little guidance on this issue, a Michigan state court has begun to address conflicting state and local drone laws. In February 2020, the court issued an injunction that prevents a Michigan county from enforcing an ordinance restricting drone operations. The injunction stemmed from a lawsuit challenging, on grounds of state law preemption, a local law prohibiting drone use in county parks. The lawsuit, MCDO v. Genesee County, stems from an incident in which county officials arrested a drone operator for allegedly violating the park rules, which the county interpreted to prohibit drone operations.[38] The county later updated the rules to specifically prohibit drone flights. Michigan’s Unmanned Aircraft Systems Act, however, states: “Except as expressly authorized by statute, a political subdivision shall not enact or enforce an ordinance or resolution that regulates the ownership or operation of unmanned aircraft or otherwise engage in the regulation of the ownership or operation of unmanned aircraft.”[39] Contrary to the county’s rules, Michigan’s Act expressly permits FAA-authorized drone pilots to operate within the state. The plaintiff in MCDO v. Genesee County sought, in part, a declaratory judgment that the park rule is void and unenforceable as preempted by state law. After reviewing written submissions and hearing oral arguments, the court issued an interim order on November 26, 2019 in which it ordered the parties to supplement their positions and temporarily enjoined the county from enforcing any ordinance involving drones.[40] In February 2020, the Court found that the county’s rule was improper and issued an injunction prohibiting the county from enforcing any ban on the possession, use, or operation of drones. Although this lawsuit may bring some clarity surrounding state law preemption of local laws, it does not address the issue of federal preemption or ownership of low-altitude airspace. Similar cases will likely arise throughout various states as the drone industry continues to move forward. Beyond state law preemption issues, the courts will eventually be required to address issues concerning federal preemption of state and local airspace laws and the boundaries of low-altitude airspace over private land. Legal clarity is essential for large-scale commercial operations. Resolution of these issues is not only relevant for many states with similar laws, but it is also vital for an industry facing many legal uncertainties.

E.   Proposed Rules for Operations at Night and Over People

Part 107 of the FAA regulations covers a broad spectrum of uses for small UAS weighing less than 55 pounds.[41] Currently, operations occurring at night and operations occurring over people each require a waiver. In an effort to mitigate safety risks while not inhibiting commercial and technological advancements, in early 2019, the FAA and the Department of Transportation shared a Notice of Proposed Rule Making (“NPRM”) proposing alterations to Part 107 to make operation of small unmanned aircrafts over people and at night legal, under certain circumstances, without a waiver.[42] The NPRM states that this proposed rule is part of the FAA’s “incremental approach to integrat[e] [small unmanned aircraft] into the national airspace system.”[43] Comments on the NPRM were due April 15, 2019.[44] The proposed rule regarding operation of drones over people separates operations into three categories.[45] Category 1 is the most lenient category and covers UAS under 0.55 pounds. Category 1 operations can occur over people due to the fact that such light UAS “pose a low risk of injury.” Because Category 1 only covers extremely light UAS, usages in this Category will most likely be limited to photography and videography. Categories 2 and 3 cover UAS greater than 0.55 pounds. These categories allow UAS to be flown over people only if the manufacturer has proven that a resulting injury to a person would be under a specified severity threshold. Category 2 aircraft will need to demonstrate a certain injury threshold, and Category 3 aircraft will have a higher injury threshold with additional operating limitations.[46] To compensate for the higher potential injury of a Category 3 flight, operations falling into Category 3 cannot occur over open-air assemblies of people, operations must take place over closed or restricted access sites, and the UAS may not hover over people. For both Category 2 and Category 3, the UAS may not have any exposed rotating parts that could result in skin laceration. The rule has not yet gone into effect, but the FAA predicts a number of operations taking place within Categories 2 and 3 will occur. These operations could include rescue and emergency response efforts, newsgathering, wildlife tracking, and filming large events. Regarding drone operations at night, the proposed rule would allow remote pilots, with certain qualifications, to fly at night without a waiver. Specifically, pilots must take and pass an updated knowledge test or participate in a training on night operations, and pilots must equip their UAS with anti-collision lights visible for a minimum of three miles.[47] As noted, the new rules have not been enacted. In the interim, the FAA issued its first Part 107 waiver to the Hensel Phelps Construction Company of Greeley, Colorado, which allows the company to operate a parachute-equipped drone over people.[48] The FAA stated this marked “the first time the FAA has collaborated with industry in developing a publicly available standard, worked with an applicant to ensure the testing and data collected acceptably met the standard, and issued a waiver using an industry standard as a basis to determine that a proposed [small unmanned aircraft] operation can be safely conducted under the terms and conditions of a waiver under Part 107.”[49] The FAA confirmed that this same process is “available to other applicants who propose to use the same drone and parachute combination.”[50]

F.   New Regulations for Hobbyists

This past year also brought new rules for recreational “hobbyist” drone pilots. The FAA published new rules to the Federal Register in May 2019, which included two significant changes. First, recreational pilots are now required to pass a knowledge test and carry proof of passage while flying. The test is still in development, and the details of its contents have not yet been publicly shared. Second, the previously applicable “five-mile rule” regarding hobbyist operations near airports is no longer in effect. Whereas the old rule simply required hobbyist operators to “[p]rovide prior notification to the airport and air traffic control tower, if one is present, when flying within 5 miles of an airport” (no paperwork or approval was required), the new rules require hobbyists to actually obtain airspace authorization from the FAA prior to any operations within five miles of an airport.[51]

II.   Space

A.   Space Agencies Around the World Seek Major Milestones

The United States is once again looking toward the Moon. As 2019 marked the 50th anniversary of the Apollo 11 moon landing, NASA announced its new Moon program: Artemis.[52] Artemis will proceed under a two-phase program: Phase 1 will land astronauts on the Moon by 2024, and Phase 2 will establish a sustained human presence on the Moon by 2028.[53] In addition to announcing its lunar ambitions, NASA astronauts Christina Koch and Jessica Meir performed the first all-female spacewalk on October 18, 2019, and Koch also completed the longest ever spaceflight by a woman after spending nearly 11 months in orbit.[54] Koch’s record-setting spaceflight provides researchers the opportunity to study the effects of long-duration spaceflight on a woman in support of NASA’s plans to send astronauts to the moon and Mars.[55] 2019 also saw China successfully execute a soft landing on the far side of the Moon. China’s fourth moon probe, Chang’e-4, landed on the far side of the Moon at the Von Kármán crater on January 3, 2019.[56] Landing on the far side of the Moon is a historically difficult mission: the relative positioning of the probe, Moon, and Earth results in the Moon blocking signals between the craft and the Earth. China mitigated this challenge by first launching a relay satellite into lunar orbit which enabled the craft to maintain communications from any point on the lunar surface.[57] Israel and India were less successful in seeking their respective 2019 milestones. In April 2019, Israel’s Beresheet spacecraft—built by SpaceIL and Israel Aerospace in a privately funded mission—crashed into the lunar surface after an apparent failure of its main engine.[58] In September 2019, India’s Vikram moon lander crashed into the lunar surface after experiencing issues with its braking rockets.[59] India, however, still made space history in 2019 when it fired a ground-based anti-satellite missile and struck an unidentified Indian satellite in low Earth Orbit.[60] India’s March 27, 2019 test, dubbed “Mission Shakti,” made India the fourth country (after the United States, Russia, and China) to test anti-satellite missile capability.[61] Japan ventured into new territory as well when its asteroid-sampling Hayabusa-2 spacecraft fired a bullet into the Ryugu asteroid’s surface and “bombed” the asteroid with a plastic explosive in order to collect samples from below the surface.[62] After spending more than a year on the asteroid, Hayabusa-2 began its long journey home in November 2019.[63] Most recently, Iran’s Islamic Revolutionary Guard Corps claimed it put a military satellite into orbit for the first time this April.[64] According to the Revolutionary Guard, the “Noor” satellite reached an orbit of 265 miles (425 kilometers) above the Earth’s surface. The launch of Iran’s “Noor” satellite has not been independently confirmed at the time of publication.[65] If confirmed, the news will be concerning to nations that worry such space launches would enable Iran to develop intercontinental ballistic missiles.[66]

B.   NASA Embraces Partnerships with the Commercial Market

The past year marked an expansion in NASA’s embrace of the commercial space industry. In 2019, NASA announced its first partnerships with commercial businesses to provide payload services in connection with the agency’s Artemis lunar program.[67] Fourteen companies have now been selected to provide these services.[68] These companies will fly NASA’s payloads, primarily scientific instruments, to designated locations on the Moon.[69] The first commercial transport of NASA astronauts to the International Space Station is expected this year after significant milestones were achieved in 2019. In March 2019, Elon Musk’s Space Exploration Technologies Corp. (“SpaceX”) launched its first unmanned demonstration flight of its Dragon spacecraft, which will carry out the mission.[70] The Dragon autonomously docked with the International Space Station, becoming the first American spacecraft to successfully do so.[71] The Dragon flight is scheduled to transport its first NASA astronauts to the Space Station on May 27.[72] NASA and SpaceX have not yet announced any change in schedule due to the COVID-19 pandemic. If all goes as planned, the May flight will mark the first time that a private commercial spacecraft will transport NASA astronauts to the Space Station and additionally marks the end of NASA’s nearly decade-long reliance on Russia’s Soyuz spacecraft for transport. The process of building commercial craft for crew transport has been in the works since 2014 when NASA selected SpaceX and Boeing for the project.[73] One of 2019’s biggest announcements in the space tourism sector also came from NASA: the agency will now allow private citizens to use the Space Station.[74] Bigelow Space Operations, the service subsidiary of Bigelow Aerospace, and Axiom Space are two companies already arranging trips for passengers.[75] These companies will have to pay NASA approximately $35,000 a night per passenger to use the Space Station’s amenities.[76] Consumers, however, can expect to pay significantly more—seats are currently running for upwards of $50 million.[77] While Axiom Space officials expect that a flight could take off as soon as the second half of 2021, the effect of closures and layoffs due to COVID-19 may impact these companies’ ambitions.[78] NASA’s opening of the Space Station to private tourism is just one of several new policies designed to bring business to space. Last year, NASA began seeking proposals from private companies interested in providing a habitable commercial module to be attached to the Space Station.[79] The project was awarded to Axiom Space in February.[80] The next steps will involve Axiom Space and NASA negotiating a contract with the goal of completing the project by 2024.[81] Other companies are also likely to take advantage of NASA’s new initiatives. Virgin Galactic and Blue Origin, LLC are two such companies that have made serious progress toward orbital and suborbital commercial flight in the past year. Last February, Virgin Galactic conducted its second successful manned space flight.[82] Company officials are optimistic that commercial flights will begin in the near future.[83] In December, Blue Origin completed its 12th unmanned test flight of its suborbital New Shepard spacecraft, but has not yet put any people aboard.[84] It has not yet announced when it would start flying passengers.[85]

C.   Creation of Space Force

The United States Space Force was established on December 20, 2019 with the enactment of the National Defense Authorization Act for Fiscal Year 2020 (“NDAA”). The Space Force is now the sixth branch of the United States military, and the first new military service in more than 70 years.[86] Its duties are to “(1) protect the interests of the United States in space; (2) deter aggression in, from, and to space; and (3) conduct space operations.”[87] The NDAA redesignated the Air Force Space Command (“AFSPC”), established in 1982, as the Space Force in an initial step to establish this new service.[88] AFSPC had a core mission of space operations focused on “missile warning, launch operations, satellite control, space surveillance and command and control.”[89] The Space Force will continue this mission and is additionally charged with safeguarding United States space systems, such as satellites.[90] Structurally, the Space Force is organized within the Department of the Air Force, in an arrangement similar to that of the Marine Corps within the Department of the Navy.[91] Accordingly, the Secretary of the Air Force, currently Barbara M. Barrett, has overall responsibility for the Space Force.[92] The Space Force’s highest-ranking military leader, Chief of Space Operations, is General John W. Raymond.[93] Pursuant to the NDAA, in December 2020, one year after the enactment of the NDAA, the Chief of Space Operations shall become a member of the Joint Chiefs of Staff, further elevating this new position.[94] Congress approved $40 million for Space Force operations and maintenance in fiscal year 2020 appropriations, about $32 million less than the amount requested by the Trump administration.[95] However, this diminutive amount, representing just 0.0054% of the total defense budget authorized in the NDAA, is likely far from the true cost of implementing the Space Force and not indicative of its budget at full capacity. Previously, in May 2019, the Congressional Budget Office estimated that a new space service within the Department of the Air Force would cost about $1.3 billion annually and approximately $1.1 billion to $3 billion in one-time set up costs.[96] Thus, the actual costs for the Space Force should become clearer in the coming years as the Department of Defense requests appropriations. Congress directed the Secretary of the Air Force to implement the Space Force provisions by no later than 18 months after enactment of the NDAA.[97] Congress also required that no later than 60 days after the enactment of the NDAA, and every 60 days thereafter until March 31, 2023, the Secretary of the Air Force and the Chief of Space Operations jointly provide briefing on the status of implementing the Space Force to congressional defense committees.[98] In so doing, Congress seemingly recognized that the Space Force will likely take years to become fully functional. The establishment of the Space Force represents a recognition of the value of space to the prosperity and military prowess of the United States and the broader global economy. The United States alone has 901 satellites, which support GPS, banking operations, mobile technology, meteorology, and missile detection, among other technological capabilities.[99] These crucial instruments touch upon many aspects of daily life, and their destabilization would result in severe domestic and global ramifications. Several countries, including China and India, have already demonstrated the ability to shoot down satellites, and Russia continues to test an anti-satellite weapon.[100],[101] China and Russia are also developing methods to disrupt satellite functions.[102] As these countries, and others, enhance their abilities to launch and impede space systems, the space environment is fast becoming another area of serious geopolitical and economic import. Should armed conflict erupt in space, the task of fighting adversaries is under the purview of the United States Space Command—not the Space Force (although General Raymond is currently dual-hatted as commander of Space Command).[103] To address these strategic challenges, Space Force leadership is grappling with institutional questions regarding what field commands will be created, how to envelop existing structures such as the Space and Missile Systems Center, and how best to transition certain Air Force bases that predominantly run space operations, including Peterson Air Force Base in Colorado and Vandenberg Air Force Base in California.[104] These questions must be answered with existing human resources. Pursuant to the current legislation, only Air Force personnel are allowed to transfer to the Space Force, and the Space Force cannot add any new military billets.[105] Nonetheless, due to the redesignation of AFSPC, the Space Force has been assigned 16,000 airmen and civilian employees to start.[106] Over the next 18 months, space-related Air Force personnel will transfer to the Space Force to become Space Force service members.[107] The creation of the Space Force will likely have effects beyond the Department of the Air Force. Though currently not permitted, the Department of Defense’s long-term vision is to authorize Army and Navy elements to transfer and join the Space Force in order to consolidate space personnel across the military branches into one service.[108] Another potential military resource that may eventually be used to support the Space Force is the Space National Guard. To fill the present gap, the Air National Guard has been asked to create four offensive space control squadrons in California, Colorado, Florida and Hawaii.[109] Due to the congressional mandate, the next year and a half will be a particularly crucial period for defining the mission, organization, and capabilities of the Space Force as Space Force leadership determines the direction of this new military branch.

D.   Internet Satellites

The United Nations Telecommunication Development Sector estimated that by the end of 2019, just 53.6% of the global population—slightly more than four billion people—were internet users.[110] The Federal Communications Commission (“FCC”) estimates that there are about 14 million rural Americans who do not have access to even the slowest mobile broadband services.[111] One idea to bring internet access to all corners of the globe is the use of thousands of internet satellites circulating at low Earth orbit. These satellites would orbit only hundreds of miles above the Earth—as opposed to the 22,000 miles at which large geosynchronous satellites presently orbit—significantly reducing the response times for internet connections.[112] Orbiting closer to the Earth also means that the satellites travel faster, therefore requiring more satellites in the system to provide continuous internet connection to its customers.[113] These satellites grouped in one network are called a “constellation,” and a network with hundreds or thousands of satellites has been nicknamed a “megaconstellation.” Morgan Stanley estimates the space economy, which includes the consumer broadband sector, will grow to more than $1 trillion over the next 20 years.[114] In light of this potential opportunity, several commercial entities have received permission to launch and operate constellations, including SpaceX, Amazon, Telesat, and OneWeb. These four companies have announced their intention to launch as many as 46,100 satellites combined in the near future, dwarfing the present number of satellites in orbit—about 2,000.[115] These ventures will have to adhere to launch requirements in order to retain their full rights in space, due to regulations implemented by the United Nations International Telecommunication Union (“ITU”) in November 2019. After a seven-year window from their spectrum request, constellation operators must launch 10% of their satellites in two years, 50% in five years, and 100% in seven years.[116] Failure to launch in accordance with these milestones will subject the operators to proportional limits on their spectrum rights.[117] SpaceX is one such venture that plans to operate a megaconstellation. SpaceX’s initial Starlink plan called for a constellation of 12,000.[118] SpaceX has since filed for permission from the ITU to launch another 30,000 satellites.[119] Elon Musk, SpaceX’s founder and chief executive, estimates that Starlink would be economically viable at 1,000 satellites, and that the annual internet revenue from the Starlink system, if successful, would be $30 billion.[120] In its first Starlink launch in May 2019, SpaceX sent 60 internet communications satellites into orbit.[121] According to Mark Juncosa, vice president for vehicle engineering at SpaceX, a further 24 launches would put enough satellites into orbit to provide internet coverage to most populated areas and 30 launches would result in satellite coverage for the entire world.[122] To date, SpaceX has launched about 350 Starlink satellites.[123] SpaceX intends to compete directly with traditional internet service providers and plans to begin offering services for consumers in the United States in mid-2020.[124] With potentially thousands more satellites in orbit than needed for global coverage, Starlink could also serve specialized needs. For example, the U.S. Air Force is testing Starlink’s technology for encrypted military communications in military aircraft as part of a SpaceX contract with the Pentagon.[125 Amazon and Telesat have not yet launched a satellite but have announced plans to move forward with their planned constellations.[126] Project Kuiper is Amazon’s internet satellite venture that aims to operate a system of 3,236 satellites.[127] Amazon has yet to announce a timetable for its launches, and it is currently seeking expedited FCC approval for the launch and operation of the Kuiper satellites.[128] Morgan Stanley believes Project Kuiper could represent a $100 billion opportunity for Amazon.[129] Canadian corporation Telesat has partnered with the Canadian government to provide internet access across rural and remote areas of Canada.[130] Telesat envisions a smaller constellation of about 300 satellites, with a goal of providing regional coverage in 2022 and global service in 2023.[131] Notwithstanding the considerable revenue projections, the commercial internet satellite industry still faces challenges. One of the leading competitors, OneWeb, a London-based company, filed for Chapter 11 bankruptcy in late March 2020.[132] To date, OneWeb has successfully launched 74 satellites.[133] OneWeb had intended to begin coverage in 2021, selling its services first to governments and corporate customers, then to consumer internet providers.[134]

E.   A Year of Serious Investment in Space

2019 was a year of serious space investment. Increased private funding, technological advancement, and growing public interest fueled serious investment in the space industry. Market pundits estimate the industry may nearly triple its revenue generation to $1 trillion by 2040. This growth appears driven by two key trends—a broad spectrum investor pool and increased diversity in investment opportunities. One of the biggest industry moves of the year was Virgin Galactic’s October IPO. On October 25, Virgin Galactic announced the completion of a merger with Social Capital Hedosophia, creating Virgin Galactic Holdings, Inc., the first publicly traded commercial human spaceflight company.[135] The IPO reflects a larger market trend: the space industry as a viable investment for the public.[136] Indeed, 2019 saw the pool of investors investing in the space industry expand to even the most traditionally risk averse of investors—pension funds—with the Ontario Teachers’ Pension Plan, a fund with over $190 billion in managed assets, investing an undisclosed amount in SpaceX this past June.[137] Also contributing to the investment surge is the diversity of the current commercial opportunities in the space sector. Opportunities were traditionally limited to military contracts and large-scale communications satellites. Now, however, opportunities exist in private spaceflight, satellite broadband, and imagery and data analysis.[138] And these developing sub-industries are likely to generate work for a second tier of companies providing technology and components to these end service providers. Recent moves by the government, the traditional investor in the domestic space industry, have also fed into this diversification. In 2019, NASA announced several initiatives that will open up the Space Station for commercial use, creating new opportunities for private businesses. These initiatives come on top of NASA’s aforementioned partnership with Boeing and SpaceX to develop commercial craft for shuttling astronauts to the Space Station. Additionally, the new U.S. Space Force is expected to generate additional investment and innovation opportunities for existing and emerging businesses in the space industry.[139] These positive investment trends continued through the first months of 2020. In February, the Trump administration announced that it would be boosting NASA’s budget by 12%, bringing it to $25.2 billion.[140] But the COVID-19 pandemic has since cast a shadow on the industry. Furloughs, temporary closures, bankruptcies, delays, and lack of investor funding are just part of the impact felt by the space industry.[141] As discussed above, satellite company OneWeb appears to be the first casualty of the pandemic, filing for Chapter 11 relief.[142] According to OneWeb, the “financial impact and market turbulence related to the spread of COVID-19” prevented the company from obtaining the financing that it needed to fully fund its operations.[143] Government investment remains largely consistent. The Department of Defense is taking steps to keep its contractors, including those supplying the U.S. Space Force, at work by easing cash flow to contractors and ensuring timely payment.[144] The government has also continued investing in NASA, earmarking $60 million under the Coronavirus Aid, Relief, and Economic Security Act to support the agency.[145]

III.   Government Contracts

In this update, we summarize select recent government contracts decisions that involve companies in the aerospace and defense industry, as well as decisions that may be of interest to them. These cases address a wide range of issues with which government contractors in the aerospace and defense industry should be familiar.

A.   Armed Services Board of Contract Appeals Cases

Aero Tech Services Associates, Inc., ASBCA No. 61682 (Mar. 30, 2020)

Aero Tech Services Associates, Inc. (“ATSA”) performed logistical maintenance services for two E-9A aircraft at Tyndall Air Force Base. As part of this contract, ATSA provided “over and above” tasks, engineering services, test and FAA certification of modifications, installation of modifications, and depot maintenance support. Under the contract, “over and above” charges were Government-directed tasks within the scope of the contract but not specifically forecasted. For the first six years of performance, the parties operated under a prior contract that fully reimbursed over and above subcontractor work; in contrast, the follow-on contract at issue in this case limited subcontractor over and above reimbursements to a fixed price. In the course of an “over and above” task, ATSA requested that a team from another government contractor evaluate the severity of corrosion in an engine pursuant to a subcontract agreement. That contractor then charged ATSA a total price for the work. ATSA characterized the contractor as a “vendor,” claimed that the fixed hourly rate applicable to subcontractors for “over and above” tasks did not apply to “vendors,” and therefore argued that it should have been reimbursed for the contractor’s labor associated with “over and above” work as a material cost for which it was entitled to full reimbursement. The Government argued that the costs at issue are for subcontractor labor, which is only reimbursable up to a particular fixed hourly rate. The Board rejected ATSA’s argument, holding that the plain language of the contract was unambiguous and did not support ATSA’s interpretation that the contractor did not qualify as a “subcontractor” for purposes of determining the over and above payment.

CLC Construction Company, ASBCA No. 59110 (Apr. 17, 2020)

CLC Construction Co. (“CLC”) was awarded a contract in 2011 to build a courthouse in Afghanistan. The Government initially terminated the contract for convenience, but later rescinded the termination for convenience and terminated the contract for default instead, alleging that the CLC violated the Procurement Integrity Act, (“PIA”) 41 U.S.C. §§ 2101-07. Specifically, the government alleged that CLC’s then-CEO improperly received the dollar amount of the lowest cost proposal and a copy of the Government’s independent estimate for the project before contract proposals were due. CLC appealed the contract termination, and the Government sought summary judgment. The Government argued that because CLC allegedly engaged in illegal conduct, the contract was void ab initio, and there was therefore no basis for the appeal. The Board first rejected the government’s contention that CLC’s appeal was untimely. The contracting officer in this case had issued two final decisions—the first decided that CLC had engaged in illicit or improper activity prior to the contract’s award, and the second asserted a new legal theory based on the same facts to justify the contract’s termination. Although CLC appealed the first decision, it failed to appeal the second final decision. The Board found that CLC’s initial appeal of the first final decision was sufficient because, in that appeal, CLC denied all the facts applicable to both final decisions. The Board then denied summary judgment because the Government did not sufficiently demonstrate that CLC had violated the PIA. The Government did not show, for example, that CLC received the information in exchange for something of value, such as payment, or to gain a competitive advantage. The Board also noted the Government’s failure to show that the information CLC possessed constituted prohibited information under the PIA because the independent government estimate did not fit within the definition of “source selection information” set forth in the PIA.

B.   Civilian Board of Contract Appeals Cases

Pernix Serka Joint Venture v. Dep’t of State, CBCA No. 5683 (Apr. 22, 2020)

Pernix Serka Joint Venture (“Pernix”) was performing a firm fixed price contract to construct a rainwater capture and storage system in Sierra Leone when the region was disrupted by the Ebola virus. Although Pernix sought guidance from the Department of State (“DOS”) about how to respond to the outbreak, DOS did not provide the requested guidance. Pernix took several actions, including demobilizing and remobilizing and later contracting for additional medical services for its employees. Pernix requested an equitable adjustment for these increased costs, which DOS denied. Pernix appealed under several theories, including cardinal change, constructive change, and breach of implied duty to cooperate. The Government moved for summary judgment, arguing that because Pernix had a firm fixed price contract, Pernix assumed the risks of any unexpected costs not attributable to the Government. In granting the summary judgment, the Board rejected Pernix’s argument that there had been a “cardinal change,” because the DOS never changed the description of work expected from Pernix under the contract. The Board also rejected Pernix’s argument that a constructive change had occurred, because the Government did not direct Pernix to demobilize or remobilize its employees. Ultimately, the Board ruled that summary judgment was appropriate because Pernix did not identify any basis to shift the risk under its fixed price contract to the Government.

CSI Aviation, Inc. v. Dep’t of Homeland Security and Gen’l Svcs. Administration, CBCA Nos. 6581, 6582 (Feb. 21, 2020).

In an interesting case raising the issue of the proper Government agency respondent, the CBCA recently deferred ruling on the jurisdictional question of whether an agency’s contracting officer has the authority to deny a contractor certified claim. CSI Aviation, Inc. (“CSI”) sells air transportation services to federal agencies under a GSA Schedule contract. U.S. Immigration and Customs Enforcement (“ICE”), which placed orders under the GSA Schedule contract, failed to pay two invoices related to chartered flights, and CSI submitted a certified claim to both the ICE contracting officer and the GSA Schedule contracting officer. CSI requested that the ICE contracting officer refer the claim to the GSA Schedule contracting officer, but the ICE contracting officer did not do so and denied the claim on the basis that the schedule contract did not apply to the task orders at issue. In response, CSI filed two appeals with the Board: CBCA 6581 appealed the ICE contracting officer’s denial, and CBCA 6582 protectively appealed the “deemed denial” of its claim by GSA. CSI moved to stay CBCA 6581, in which ICE is the respondent, and encouraged the Board to move forward with CBCA 6582, in which GSA was the respondent. GSA moved to dismiss CBCA 6582 for lack of jurisdiction. CSI then moved for the Board to consolidate the two appeals and designate GSA as the “lead respondent” because the ICE contracting officer did not have the authority to render his final decision. In short, both GSA and ICE wanted the Board to proceed only with CBCA 6581 involving DHS/ICE, whereas CSI wanted the Board to proceed with CBCA 6582 but keep CBCA 6581 on the docket until CBCA 6582 was resolved. The Board granted CSI’s motion to consolidate because both appeals were borne from the exact same facts and raised the same question of law: whether the ICE contracting officer had the authority to issue a denial or whether the claim required an interpretation of the schedule contract and thus must be decided by GSA. The Board noted that this case was difficult because the jurisdictional question is essentially the same as the merits question, but determined that it need not immediately decide which agency should have adjudicated CSI’s claim because CSI sent the claim to both agencies and both agencies are currently before the Board. In a separate appeal, CSI Aviation, Inc. v. General Services Administration, CBCA No. 6543 (Mar. 10, 2020), the Board denied ICE’s motion to intervene to “assert defenses against CSI’s contract claims” because “ICE’s legal and financial interests may be at variance with GSA’s interests” in this case. The Board rejected ICE’s contention that it could have interests “at variance” to GSA where “a respondent agency appears before us on behalf of and in the interests of the United States and not of the agency alone” (emphasis added). In denying ICE’s motion to intervene, the Board clarified that ICE is free to aid GSA in their case and communicate with GSA if ICE is dissatisfied with GSA’s conduct as the respondent.

C.   Court of Federal Claims Cases

Raytheon Co. v. U.S., No. 19-883C (Fed. Cl. Jan. 14, 2020)

Raytheon Company (“Raytheon”) contracts with the United States Army to supply engineering services supporting the Patriot weapon system. Raytheon placed certain proprietary markings on vendor lists that Raytheon was contractually obligated to supply to the Army. The contracting officer (“CO”) directed Raytheon to remove the proprietary marks from the vendor lists and to replace them with the legend used for technical data in which the government holds “government purpose rights” under DFARS 252.227-7013. Raytheon filed suit, arguing inter alia that the CO’s final decision directing Raytheon to affix the government purpose rights legend was invalid because Raytheon did not receive certain statutorily-required procedural protections in the CO’s decision-making process; that the Army breached the contract by failing to follow procedures for challenge restrictive markings; and that Raytheon’s vendor lists are not technical data as defined in the DFARS. The Government moved to dismiss Raytheon’s complaint for lack of subject-matter jurisdiction and failure to state a claim. Specifically, the Government argued that the Court did not have jurisdiction to hear the claims under the Tucker Act, 18 U.S.C. § 1491(a)(1), because Raytheon sought only declaratory relief and no monetary damages. The Court agreed that it did not have jurisdiction under the Tucker Act but held that it did properly have jurisdiction under the Contract Disputes Act. The Court explained that Raytheon’s request for declaratory judgment constitutes a claim concerning any “nonmonetary dispute[] on which a decision of the contracting officer has been issued” under the CDA. A “claim” is defined by FAR 2.101 as a demand by any party seeking, among other things, “relief arising under or relating to the contract.” The Court held that it has the power to decide whether Raytheon is compelled to comply with the CO’s decision in light of the alleged procedural deficiencies in the CO’s process and denied the government’s motion to dismiss.

D.   Federal Circuit Court of Appeals Cases

Northrop Grumman Corp. v. Sec’y of Defense, Nos. 2018-1945, 2018-1990 (Fed. Cir. Nov. 15, 2019)

The FAR permits contractors such as Northrop Grumman Corporation (“NGC”) to seek reimbursement for post-retirement benefit costs (“PRB costs”), such as those related to post-retirement health care, life insurance, and disability benefits. Only “allowable” PRB costs are reimbursable. Prior to a 1995 amendment, the FAR did not require contractors to use any specific accounting standard in measuring PRB costs each year, and NGC used the “DEFRA” method, established by the Deficit Reduction Act of 1984. In 1995, the FAR was amended to require that government contractors comply with the Financial Accounting Standards (“FAS”) 106 to determine allowable PRB costs. Despite this FAR amendment, NGC continued using the DEFRA method to account for its PRB costs, even though DEFRA does not comply with FAS 106. NGC disclosed its use of the DEFRA method, which resulted in lower costs to the government, and the government did not object. NGC switched to the FAS method in 2006 and amended its PRB plans at the same time. The amended PRB plans reduced NGC’s PRB cost obligations by $307 million, which NGC subtracted from its transition obligation as required by FAS 106. The Defense Contract Management Agency (“DCMA”) disallowed $253 million of NGC’s PRB costs after 2006 on the basis that NGC had not used the FAS 106 method from 1995–2006.  NGC appealed to the ASBCA, which determined that NGC has and never will claim reimbursement for the $253 million in disputed costs because those costs were not incurred between 1995–2006. The Court upheld the ASBCA’s determination that NGC never claimed and will never claim any of the disputed retirement benefits. The Court also upheld the ASBCA’s holding that NGC’s PRB plan amendment effectively eliminated NGC’s transition obligation, so the government’s disallowance of the disputed funds was improper. __________________________     [1]     Yujing Liu, China Adapts Surveying, Mapping, Delivery Drones to Enforce World’s Biggest Quarantine and Contain Coronavirus Outbreak, South China Morning Post (Mar. 5, 2020), available at https://www.scmp.com/business/china-business/article/3064986/china-adapts-surveying-mapping-delivery-drones-task.     [2]     Id.     [3]     Jed Pressgrove, Do Drones Have a Realistic Place in the COVID-19 Fight?, Gov’t Tech. (Mar. 20, 2020), available at https://www.govtech.com/products/Do-Drones-Have-a-Realistic-Place-in-the-COVID-19-Fight.html.     [4]     NJ Town Resorts to Talking Drones to Enforce Social Distancing, NBC New York (Apr. 9, 2020), available at https://www.nbcnewyork.com/news/local/nj-town-resorts-to-talking-drones-to-enforce-social-distancing/2364912/.     [5]     Ben Yakas, FAA Investigating “Anti-COVID-19 Volunteer Drone” Filmed Admonishing People in NYC, Gothamist (Apr. 2, 2020), available at https://gothamist.com/news/faa-investigating-anti-covid-19-volunteer-drone-filmed-admonishing-people-nyc.     [6]     Draganfly, Inc., Draganfly’s ‘Pandemic Drone’ Technology Conducts Initial Flights Near New York City to Detect COVID-19 Symptoms and Identify Social Distancing, GlobeNewswire (Apr. 21, 2020), available at https://www.globenewswire.com/news-release/2020/04/21/2019221/0/en/Draganfly-s-Pandemic-Drone-technology-Conducts-Initial-Flights-Near-New-York-City-to-Detect-COVID-19-Symptoms-and-Identify-Social-Distancing.html.     [7]     Westport Police Department, Public Facebook Statement (Apr. 21, 2020), available at https://www.facebook.com/westportctpolice/posts/1621495744664486.     [8]     Fed. Aviation Admin., UAS Integration Pilot Program (Dec. 10, 2019), available at https://www.faa.gov/uas/programs_partnerships/integration_pilot_program/.     [9]     Fed. Aviation Admin., Integration of Civil Unmanned Aircraft Systems (UAS) in the National Airspace System (NAS) Roadmap, Second Edition 32 (July 2018), available at https://www.faa.gov/uas/resources/policy_library/media/Second_Edition_Integration_of_Civil_UAS_NAS_Roadmap_July%202018.pdf.     [10]    U.S. Dep’t of Transp., UAS Integration Pilot Program Selection Announcement (May 9, 2018), available at https://www.transportation.gov/briefing-room/uas-integration-pilot-program-selection-announcement.     [11]    Gustavo Solis, FAA Allows Chula Vista to Expand Police Drone Program, The San Diego Union Tribune (Mar. 22, 2019), available at https://www.sandiegouniontribune.com/communities/south-county/sd-se-chula-vista-drones-20190319-story.html.     [12]    Chula Vista Police Dep’t, UAS Drone Program, available at https://www.chulavistaca.gov/departments/police-department/programs/uas-drone-program (last visited Apr. 17, 2020).     [13]    Mihir Zaveri, Wing, Owned by Google’s Parent Company, Gets First Approval for Drone Deliveries in U.S., N.Y. Times (Apr. 23, 2019), available at https://www.nytimes.com/2019/04/23/technology/drone-deliveries-google-wing.html.     [14]    Wing Medium, Wing Unveils Plans for First-of-its-Kind Trial with FedEx and Walgreens, Medium (Sept. 19, 2019), available at https://medium.com/wing-aviation/wing-unveils-plans-for-first-of-its-kind-trial-with-fedex-and-walgreens-7f17350daa09.     [15]    Brian Garrett-Glaser, FAA Releases Policy Proposal for Type Certifying Drones, Aviation Today (Feb. 5, 2019), available at https://www.aviationtoday.com/2020/02/05/faa-releases-policy-proposal-type-certifying-drones/.     [16]    UPS Flight Forward Attains FAA’s First Full Approval For Drone Airline, UPS Press Release (Oct. 1, 2019), available at https://pressroom.ups.com/pressroom/ContentDetailsViewer.page?ConceptType=PressReleases&id=1569933965476-404. [17]     Fed. Aviation Admin., Fact Sheet - UAS Integration Pilot Program (Mar. 31, 2020), available at https://www.faa.gov/news/fact_sheets/news_story.cfm?newsId=23574.     [18]    Fed. Aviation Admin., Notice of Proposed Rulemaking on Remote Identification of Unmanned Aircraft Systems (Dec. 31, 2019), available at https://www.federalregister.gov/documents/2019/12/31/2019-28100/remote-identification-of-unmanned-aircraft-systems.     [19]    49 C.F.R. §§ 44101–06, 44110–13 (2019); see also Fed. Aviation Admin., FAADroneZone, available at https://faadronezone.faa.gov (last visited Apr. 17, 2020).     [20]    See Brendan Schulman, We Strongly Support Drone Remote ID. But Not Like This, DJI (Jan. 14, 2020), available at https://content.dji.com/we-strongly-support-drone-remote-id-but-not-like-this/.     [21]    Jim Moore, FAA Gets Early Earful on Drone ID, Aircraft Owners and Pilots Ass’n (Jan. 9, 2020), available at https://www.aopa.org/news-and-media/all-news/2020/january/09/faa-gets-early-earful-on-drone-id.     [22]    Fed. Aviation Admin., supra, note 18.     [23]    Id.     [24]    Jim Moore, supra, note 21.     [25]    Fed. Aviation Admin., supra, note 18.     [26]    Jim Moore, supra, note 21; Public Submissions, Remote Identification of Unmanned Aircraft Systems, regulations.gov, available at https://www.regulations.gov/docketBrowser?rpp=50&so=DESC&sb=postedDate&po=0&dct=PS&D=FAA-2019-1100 (last visited Apr. 17, 2020).     [27]    Public Submissions, Remote Identification of Unmanned Aircraft Systems, regulations.gov, available at https://www.regulations.gov/docketBrowser?rpp=50&so=DESC&sb=postedDate&po=0&dct=PS&D=FAA-2019-1100 (last visited Apr. 17, 2020).     [28]    Brendan Schulman, We Strongly Support Drone Remote ID. But Not Like This, DJI (Jan. 14, 2020), available at https://content.dji.com/we-strongly-support-drone-remote-id-but-not-like-this/.     [29]    Id.     [30]    Ryan Hawkins, Public Comment (Mar. 5, 2020), available at https://www.regulations.gov/document?D=FAA-2019-1100-52820.     [31]    Dan Hubbard, NBAA Welcomes FAA Call for Comment on Drone Identification Rule, National Business Aviation Ass’n (Dec. 27, 2019), available at https://nbaa.org/press-releases/nbaa-welcomes-faa-call-comment-drone-identification-rule/.     [32]    Id.     [33]    Jim Moore, supra, note 21.     [34]    Fed. Aviation Admin., supra, note 18.     [35]    Fed. Aviation Admin., Busting Myths about the FAA and Unmanned Aircraft (Mar. 7, 2014), available at https://www.faa.gov/news/updates/?newsId=76240.     [36]    Huerta v. Haughwout, No. 3:16-cv-358, Dkt. No. 30 (D. Conn. July 18, 2016).     [37]    Id.     [38]    Complaint, Michigan Coalition of Drone Operators, Inc. v. Genesee County Park Commission, et al., No. 2019-113058-CZ (7th. Jud. Dist. Ct. Genesee Div., Mich. 2020).     [39]    Public Act 436 of 2016, Section 259.305.     [40]    Michigan Coalition of Drone Operators, Inc. v. Genesee County Park Commission, et al., No. 2019-113058-CZ (7th. Jud. Dist. Ct. Genesee Div., Mich. 2019).     [41]    Fed. Aviation Admin., Press Release – DOT and FAA Finalize Rules for Small Unmanned Aircraft Systems (June 21, 2016), available at https://www.faa.gov/news/press_releases/news_story.cfm?newsId=20515.     [42]    Id.     [43]    Id.     [44]    Fed. Aviation Admin., Recently Published Rulemaking Documents, available at https://www.faa.gov/regulations_policies/rulemaking/recently_published/ (last visited Apr. 17, 2020).     [45]    Dep’t of Transp., Operation of Small Unmanned Aircraft Systems over People (June 21, 2019) https://www.faa.gov/uas/programs_partnerships/DOT_initiatives/media/2120-AK85_NPRM_Operations_of_Small_UAS_Over_People.pdf.     [46]    Id.     [47]    Id.     [48]    Fed. Aviation Admin., FAA Issues Waiver to Fly Drones With Parachutes (June 5, 2019), available at https://www.faa.gov/news/updates/?newsId=93846.     [49]    Id.     [50]    Id.     [51]    Fed. Aviation Admin., Recreational Flyers & Modeler Community-Based Organizations (Feb. 18, 2020), available at https://www.faa.gov/uas/recreational_fliers/.     [52]    “Artemis was the twin sister of Apollo and goddess of the Moon in Greek Mythology.” What is Artemis?, NASA (July 25, 2019), available at https://www.nasa.gov/what-is-artemis.     [53]    Id.     [54]    Friday’s All-Woman Spacewalk: The Basics, NASA (Oct. 17, 2019), available at https://www.nasa.gov/feature/fridays-all-woman-spacewalk-the-basics.     [55]    Id.; Media Invited to Speak with Record-Breaking NASA Astronaut Christina Koch, NASA (Feb. 7, 2020), available at https://www.nasa.gov/press-release/media-invited-to-speak-with-record-breaking-nasa-astronaut-christina-koch.     [56]    Andrew Jones, China’s Chang’e 4 Returns First Images from Moon’s Farside Following Historic Landing, Space.com (Jan. 03, 2020), available at https://www.space.com/42884-china-change-e-4-first-images-moon-far-side.html.     [57]    Adam Mann, China’s Chang’e Program: Missions to the Moon, Space.com (Feb. 1, 2020), available at https://www.space.com/43199-chang-e-program.html.     [58]    Rebecca Morelle, Israel’s Beresheet Spacecraft Crashes on Moon, BBC News (Apr. 11, 2019), available at https://www.bbc.com/news/science-environment-47879538.     [59]    Government of India, Department of Space, Lok Sabha Unstarred Question No. 588 (Nov. 20, 2019), available at http://164.100.24.220/loksabhaquestions/annex/172/AU588.pdf.     [60]    Jeff Foust, India Tests Anti-Satellite Weapon, Space.com (Mar. 27, 2020), available at https://www.space.com/india-tests-anti-satellite-weapon.html.     [61]    Id.     [62]    Paul Rincon, Hayabusa-2: Japanese Probe Likely to Have ‘Bombed’ an Asteroid, BBC News (Apr. 5, 2019), available at https://www.bbc.com/news/science-environment-47818460; Hayabusa-2: Japan Spacecraft Leaves Asteroid to Head Home, BBC News (Apr. 11, 2019), available at https://www.bbc.com/news/world-asia-50403272.     [63]    Meghan Bartels, Farewell, Ryugu! Japan’s Hayabusa2 Probe Leaves Asteroid for Journey Home, Space.com (Nov. 13, 2019), available at https://www.space.com/hayabusa2-spacecraft-leaves-asteroid-ryugu.html.     [64]    Iran’s Revolutionary Guards ‘Successfully Launch Military Satellite’, BBC News (Apr. 22, 2020), available at https://www.bbc.com/news/world-middle-east-52380507.     [65]    The Associated Press, Iran Says It Launched a Military Satellite Into Orbit, N.Y. Times (Apr. 22, 2020), available at https://www.nytimes.com/2020/04/22/world/middleeast/iran-satellite-launch.html.     [66]    Id.     [67]    NASA Selects First Commercial Moon Landing Services for Artemis Program, NASA (May 31, 2019), available at https://www.nasa.gov/press-release/nasa-selects-first-commercial-moon-landing-services-for-artemis-program.     [68]    NASA Award Contract to Deliver Science Tech to Moon Ahead of Human Missions, NASA (Apr. 8, 2020), available at https://www.nasa.gov/press-release/nasa-awards-contract-to-deliver-science-tech-to-moon-ahead-of-human-missions.     [69]    Id.     [70]    Dragon, SpaceX, available at https://www.spacex.com/dragon (last visited Feb. 3, 2020).     [71]    Id.     [72]    Reuters, NASA Sets Launch Date for SpaceX U.S. Manned Mission to Space Station, N.Y. Times (Apr. 20, 2020), available at https://www.nytimes.com/reuters/2020/04/20/world/europe/20reuters-space-exploration-spacex-launch.html.     [73]    Christian Davenport, After Botched Test Flight, Boeing Will Refly its Starliner Spacecraft for NASA, Washington Post (Apr. 6, 2020), available at https://www.washingtonpost.com/technology/2020/04/06/boeing-starliner-test-repeat/.     [74]    Kenneth Chang, Want to Buy a Ticket the Space Station? NASA Says Soon You Can, N.Y. Times (June 7, 2019), available at https://www.nytimes.com/2019/06/07/science/space-station-nasa.html.     [75]    Id.     [76]    Id.     [77]    Kenneth Chang, There Are 2 Seats Left for This Trip to the International Space Station, N.Y. Times (Mar. 5, 2020), available at https://www.nytimes.com/2020/03/05/science/axiom-space-station.html.     [78]    Id.; Jonathan O’Callaghan, The Coronavirus Is Starting To Have A Serious Impact On The Space Industry, Forbes (Mar. 25, 2020), available at https://www.forbes.com/sites/jonathanocallaghan/2020/03/25/the-coronavirus-is-starting-to-have-a-serious-impact-on-the-space-industry/#7e0b851c4cba.     [79]    NASA Selects First Commercial Destination Module for International Space Station, NASA (Jan. 27, 2020), available at https://www.nasa.gov/press-release/nasa-selects-first-commercial-destination-module-for-international-space-station.     [80]    Id.     [81]    Id.     [82]    Virgin Galactic Makes Space for Second Time in Ten Weeks with Three on Board, Reaching Higher Altitudes and Faster Speeds, as Flight Test Program Continues, Virgin Galactic (Feb. 22, 2019), available at https://www.virgingalactic.com/articles/virgin-galactic-makes-space-for-second-time-in-ten-weeks-with-three-on-board/.     [83]    Michael Sheetz, New Virgin Galactic Chairman Chamath Palihapitiya Says Tourism Spaceflights to Begin Within a Year, CNBC (July 9, 2019), available at https://www.cnbc.com/2019/07/09/virgin-galactic-says-space-tourism-flights-to-begin-in-a-year-company-will-be-profitable-in-2021.html.     [84]    Loren Grush, Blue Origin Successfully Launches and Lands its New Shepard Rocket During 12th Overall Test Flight, The Verge (Dec. 11, 2019), available at https://www.theverge.com/2019/12/10/21003756/blue-origin-new-shepard-rocket-test-launch-science-research-watch-live.     [85]    Id.     [86]    Sec’y of the Air Force Public Affairs, With the Stroke of a Pen, U.S. Space Force Becomes a Reality (Dec. 20, 2019), available at https://www.spaceforce.mil/News/Article/2046055/with-the-stroke-of-a-pen-us-space-force-becomes-a-reality.     [87]    National Defense Authorization Act for Fiscal Year 2020, S. 1790, 116th Cong. § 952 b(4) (as passed by Senate, June 27, 2019), available at https://www.congress.gov/116/bills/s1790/BILLS-116s1790enr.pdf.     [88]    H.R. Rep. No. 116-333, at 903 (2019) (Conf. Rep.).     [89]    U.S. Space Force, U.S. Space Force Fact Sheet (Mar. 31, 2020), available at https://www.spaceforce.mil/About-Us/Fact-Sheet.     [90]    Merrit Kennedy, Trump Created The Space Force. Here’s What It Will Actually Do, NPR (Dec. 21, 2019), available at https://www.npr.org/2019/12/21/790492010/trump-created-the-space-force-heres-what-it-will-do.     [91]    Marina Korn, The U.S. Space Force Is Not a Joke, The Atlantic (Jan. 15, 2020), available at https://www.theatlantic.com/science/archive/2020/01/space-force-trump/604951/.     [92]    U.S. Space Force, U.S. Space Force Fact Sheet (Mar. 31, 2020), available at https://www.spaceforce.mil/About-Us/Fact-Sheet.     [93]    Sec’y of the Air Force Public Affairs, Raymond sworn in as first Chief of Space Operations at White House event (Jan. 14, 2020), available at https://www.spaceforce.mil/News/Article/2057219/raymond-sworn-in-as-first-chief-of-space-operations-at-white-house-event.     [94]    H.R. Rep. No. 116-333, at 907-908 (2019) (Conf. Rep.), available at https://docs.house.gov/billsthisweek/20191209/CRPT-116hrpt333.pdf.     [95]    Sandra Erwin, Trump Signs Defense Bill Establishing U.S. Space Force: What Comes Next, Space News (Dec. 20, 2019), available at https://spacenews.com/trump-signs-defense-bill-establishing-u-s-space-force-what-comes-next/.     [96]    U.S. Cong. Budget Office, The Personnel Requirements and Costs of New Military Space Organizations (May 2019), available at https://www.cbo.gov/system/files/2019-05/55178-SpaceForce.pdf.     [97]    National Defense Authorization Act for Fiscal Year 2020, S. 1790, 116th Cong. § 961(a) (as passed by Senate, June 27, 2019).     [98]    S. 1790, § 961(b).     [99]    David Montgomery, Trump’s Excellent Space Force Adventure, The Washington Post Magazine (Dec. 3, 2019), available at https://www.washingtonpost.com/magazine/2019/12/03/trumps-proposal-space-force-was-widely-mocked-could-it-be-stroke-stable-genius-that-makes-america-safe-again/.     [100]   Id.     [101]   Mike Wall, Don’t panic about Russia’s recent anti-satellite test, experts say, SPACE.com (Apr. 30, 2020), available at https://www.space.com/russia-anti-satellite-weapon-fears-overblown.html.     [102]   Id.     [103]   Kennedy, supra, note 90.     [104]   Sandra Erwin, U.S. Space Force Begins to Organize Pentagon Staff and Field Operations, Space News (Jan. 16, 2020), available at https://spacenews.com/u-s-space-force-begins-to-organize-pentagon-staff-and-field-operations/.     [105]   Valerie Insinna, May The Space Force Be with You. Here’s What We Know About The US Military’s Newest Service, Defense News (Dec. 20, 2019), available at https://www.defensenews.com/breaking-news/2019/12/21/may-the-space-force-be-with-you-heres-what-we-know-about-the-us-militarys-newest-service/; National Defense Authorization Act for Fiscal Year 2020, S. 1790, 116th Cong. § 952(d)(2) (as passed by Senate, June 27, 2019).     [106]   Jim Garamone, Trump Signs Law Establishing U.S. Space Force, DoD News (Dec. 20, 2019), available at https://www.defense.gov/explore/story/Article/2046035/trump-signs-law-establishing-us-space-force/.     [107]   U.S. Space Force, U.S. Space Force Fact Sheet (Mar. 31, 2020), available at https://www.spaceforce.mil/About-Us/Fact-Sheet.     [108]   Insinna, supra, note 105.     [109]   The Associated Press, Hawaii Air National Guard to Create Space Control Squadron, Air Force Times (Jan. 12, 2020), available at https://www.airforcetimes.com/news/your-air-force/2020/01/12/hawaii-air-national-guard-to-create-space-force-squadron/.     [110]   Int’l Telecomm. Union, United Nations Telecommunication Development Sector Statistics, available at https://www.itu.int/en/ITU-D/Statistics/Pages/stat/default.aspx (last visited Apr. 17, 2020).     [111]   Michael Sheetz and Magdalena Petrova, Why in the Next Decade Companies Will Launch Thousands More Satellites Than in all of History, CNBC (Dec. 15, 2019), available at https://www.cnbc.com/2019/12/14/spacex-oneweb-and-amazon-to-launch-thousands-more-satellites-in-2020s.html.     [112]   Daniel Oberhaus, SpaceX is Banking on Satellite Internet. Maybe It Shouldn’t, Wired (May 15, 2019), available at https://www.wired.com/story/spacex-starlink-satellite-internet/.     [113]   Kenneth Chang, SpaceX Launches 60 Starlink Internet Satellites Into Orbit, N.Y. Times (May 23, 2019), available at https://www.nytimes.com/2019/05/23/science/spacex-launch.html.     [114]   Michael Sheetz, This New Business from Amazon Represents a ‘$100 Billion Opportunity,’ Morgan Stanley Says, CNBC (July 15, 2019), available at https://www.cnbc.com/2019/07/15/morgan-stanley-amazon-project-kuiper-could-be-a-100-billion-business.html.     [115]   Sheetz and Petrova, supra, note 111; Chris Baraniuk, How Internet That’s Beamed from Space Could Create New Jobs, BBC Worklife (Aug. 19, 2019), available at https://www.bbc.com/worklife/article/20190816-how-satellites-could-revolutionise-the-internet.     [116]   Caleb Henry, ITU Sets Milestones for Megaconstellations, Space News (Nov. 21, 2019), available at https://spacenews.com/itu-sets-milestones-for-megaconstellations/.     [117]   Id.     [118]   Tariq Malik, SpaceX’s Starlink Broadband Service Will Begin in 2020: Report, Space.com (Oct. 24, 2019), available at https://www.space.com/spacex-starlink-satellite-internet-service-2020.html.     [119]   Id.     [120]   Caleb Henry, SpaceX Becomes Operator of World’s Largest Commercial Satellite Constellation with Starlink Launch, Space News (Jan. 6, 2020), available at https://spacenews.com/spacex-becomes-operator-of-worlds-largest-commercial-satellite-constellation-with-starlink-launch/; Malik, supra, note 118.     [121]   Kenneth Chang, SpaceX Launches 60 Starlink Internet Satellites into Orbit, N.Y. Times (May 23, 2019), available at https://www.nytimes.com/2019/05/23/science/spacex-launch.html.     [122]   Id.     [123]   Jackie Wattles, Amid Pandemic, SpaceX Launches Another Batch of Starlink Satellites, CNN Business (Mar. 18, 2020), available at https://edition.cnn.com/2020/03/18/tech/spacex-launch-starlink-coronavirus-scn/index.html.     [124]   Jackie Wattles, The Race for Space-Based Broadband: OneWeb Launches 34 More Internet Satellites, CNN Business (Feb. 7, 2020), available at https://edition.cnn.com/2020/02/06/tech/oneweb-satellite-internet-launch-scn/index.html; Sandra Erwin, SpaceX Plans to Start Offering Starlink Broadband Services in 2020, Space News (Oct. 22, 2019), available at https://spacenews.com/spacex-plans-to-start-offering-starlink-broadband-services-in-2020/.     [125]   Malik, supra, note 118.     [126]   Sheetz and Petrova, supra, note 111.     [127]   Michael Sheetz, This New Business from Amazon Represents a ‘$100 Billion Opportunity,’ Morgan Stanley Says, CNBC (July 15, 2019), available at https://www.cnbc.com/2019/07/15/morgan-stanley-amazon-project-kuiper-could-be-a-100-billion-business.html.     [128]   Alan Boyle, Amazon Asks FCC to Give Swift Approval to Project Kuiper Satellite Network Despite SpaceX Opposition, GeekWire (Jan. 27, 2020), available at https://www.geekwire.com/2020/amazon-asks-fcc-give-swift-approval-project-kuiper-satellite-network-despite-spacex-opposition/.     [129]   Sheetz, supra, note 114.     [130]   Telesat, The Government of Canada and Telesat Partner to Bridge Canada’s Digital Divide through Low Earth Orbit (LEO) Satellite Technology, Over $1 Billion in Revenue for Telesat Expected (July 24, 2019), available at https://www.telesat.com/news-events/government-canada-and-telesat-partner-bridge-canadas-digital-divide-through-low-earth.     [131]   Sheetz and Petrova, supra, note 111.     [132]   OneWeb, OneWeb Files for Chapter 11 Restructuring to Execute Sale Process (Mar. 27, 2020), available at https://www.oneweb.world/media-center/oneweb-files-for-chapter-11-restructuring-to-execute-sale-process.     [133]   Id.     [134]   Wattles, supra, note 124.     [135]   Virgin Galactic Completes Merger with Social Capital Hedosophia, Creating the World’s First and Only Publicly Traded Commercial Human Spaceflight Company, Virgin Galactic (Oct. 25, 2019), available at https://www.virgingalactic.com/articles/virgin-galactic-completes-merger-with-social-capital-hedosophia-creating-the-worlds-first-and-only-publicly-traded-commercial-human-spaceflight-company/.     [136]   Id.     [137]   Victor Ferreira, From Space Tourism to Robo-Surgeries: Investors Are Betting on The Future Like There’s No Tomorrow, Financial Post (Dec. 27, 2019), available at https://business.financialpost.com/investing/investing-for-the-future.     [138]   Michael Sheetz, An Investor’s Guide to Space, Wall Street’s Next Trillion-Dollar Industry, CNBC (Nov. 9, 2019), available at https://www.cnbc.com/2019/11/09/how-to-invest-in-space-companies-complete-guide-to-rockets-satellites-and-more.html; Space: Investing in the Final Frontier, Morgan Stanley (July 2, 2019), available at https://www.morganstanley.com/ideas/investing-in-space.     [139]   See infra § II.A.     [140]   Andy Pasztor, Trump’s NASA Budget Will Earmark 12% Boost for Agency in 2021, Wall Street Journal (Feb. 7, 2020), available at https://www.wsj.com/articles/trumps-nasa-budget-will-earmark-12-boost-for-agency-in-2021-11581071402.     [141]   SmallSat Alliance COVID-19 White Paper, SmallSat Alliance (Apr. 21, 2020), available at https://cdn2.hubspot.net/hubfs/4653168/SmallSat%20Alliance%20COVID-19%20White%20Paper.pdf.     [142]   OneWeb, supra, note 132.     [143]   Id.     [144]   Sandra Erwin, Space and Missile Systems Center Taking Action to Help Contractors During Pandemic, Space News (Mar. 25, 2020), available at https://spacenews.com/space-and-missile-systems-center-taking-action-to-help-contractors-during-pandemic/.     [145]   $340 Billion Surge in Emergency Funding to Combat Coronavirus Outbreak, Senate Appropriations Committee, available at https://www.appropriations.senate.gov/imo/media/doc/Coronavirus%20Supplemental%20Appropriations%20Summary_FINAL.pdf (last visited Apr. 22, 2020).

The following Gibson Dunn lawyers assisted in preparing this client update: Karen Manos, David Wilf, Perlette Jura, Dhananjay Manthripragada, Jared Greenberg, Lindsay Paulin, Andrew Hazlett, Alisha Mahalingam, Ciara Davis, Afia Bonner, Chris Connelly, Sarah Scharf and Casper Yen.

Gibson Dunn lawyers are available to assist in addressing any questions you may have regarding the issues discussed above. Please contact the Gibson Dunn lawyer with whom you usually work, any of the following in the Aerospace and Related Technologies practice group:

Washington, D.C. Karen L. Manos - Co-Chair (+1 202-955-8536, kmanos@gibsondunn.com) Lindsay M. Paulin (+1 202-887-3701, lpaulin@gibsondunn.com) Christopher T. Timura (+1 202-887-3690, ctimura@gibsondunn.com) Los Angeles William J. Peters (+1 213-229-7515, wpeters@gibsondunn.com) David A. Battaglia (+1 213-229-7380, dbattaglia@gibsondunn.com) Perlette M. Jura (+1 213-229-7121, pjura@gibsondunn.com) Dhananjay S. Manthripragada (+1 213-229-7366, dmanthripragada@gibsondunn.com) Denver Jared Greenberg (+1 303-298-5707, jgreenberg@gibsondunn.com) New York David M. Wilf - Co-Chair (+1 212-351-4027, dwilf@gibsondunn.com) London Mitri J. Najjar (+44 (0)20 7071 4262, mnajjar@gibsondunn.com) Paris Ahmed Baladi (+33 (0)1 56 43 13 00, abaladi@gibsondunn.com)   © 2020 Gibson, Dunn & Crutcher LLP Attorney Advertising:  The enclosed materials have been prepared for general informational purposes only and are not intended as legal advice.

March 29, 2019 |
Aerospace and Related Technologies Update – Spring 2019

Click for PDF This March 2019 edition of Gibson Dunn’s Aerospace and Related Technologies Update discusses newsworthy developments, trends, and key decisions from 2018 and early 2019 that are of interest to aerospace and defense, satellite, and drone companies; and new market entrants in the commercial space and related technology sectors, including the private equity and other financial institutions that support and enable their growth. Specifically, this update covers the following areas: (1) commercial unmanned aircraft systems (“UAS”), or drones; (2) the commercial space sector; (3) export control; and (4) government contracts litigation involving companies in the aerospace and defense industry.  We discuss each of these areas in turn below.

I.    Commercial Unmanned Aircraft Systems

Along with changes to the legal landscape affecting drones, which are discussed in detail below, there were a number of noteworthy drone accomplishments this past year.  In 2018, a solar-powered drone maintained a high-altitude flight for nearly 26 days, breaking the world record for long-endurance drone flight.[1]  Companies exploring sustained drone flight hope to penetrate the satellite industry by providing a high-altitude, pseudo-satellite alternative to rocket-launched satellites. Police forces have also continued to find innovative uses for drones.  In the United Kingdom, police officers used drones to catch deer poachers.[2]  And in the United States, police officers used drones to create orthomosaic 3-D maps of the scenes of vehicle accidents,[3] allowing officers to digitally revisit the scene of an accident, and more quickly dismantle the scene and reduce the disruption to traffic. Drones have also continued to assist in natural disaster relief.  In 2018, drones provided assistance and relief following Hurricane Florence, the eruption of Hawaii’s Kilauea volcano, and during the California wildfires. To get you caught up on drone developments, we have provided brief updates on (A) The Federal Aviation Administration (“FAA”) Reauthorization Act, including its impact on the hobbyist exception, privacy, and enforcement, (B) the FAA’s Drone Integration Pilot Program, (C) the FAA’s Low Altitude Authorization and Notification Capability initiative, and (D) the Department of Transportation’s proposed modifications to drone rules.

A. FAA Reauthorization Act

On October 3, 2018, the U.S. Congress voted to reauthorize the FAA for a period of five years by renewing the FAA Reauthorization Act (“FAARA”),[4] and two days later President Donald Trump signed the Act into law.[5]  The House of Representatives and the Senate previously negotiated the bill’s provisions at length, and reached a final agreement in late September 2018.[6]  The final bill allocated approximately $97 billion to the FAA and its related programming, and represents the longest funding authorization period for FAA programs since 1982.[7] FAARA provides funding for the Federal Aviation Administration through 2023,[8] and includes numerous provisions affecting U.S. drone operations (notably, FAARA also includes numerous provisions affecting commercial space operations, which are discussed later).  Specifically, FAARA affects drone hobbyists, national security, and privacy, while its enforcement may raise concerns regarding federalism.

i. Repeal of Hobbyist Exception

Section 336 of the FAA Modernization and Reform Act, enacted on February 14, 2017, previously shielded drones operated for recreational purposes (“model aircraft”) from FAA regulation.  Section 336 provided that the FAA “may not promulgate any rule or regulation regarding a model aircraft.”[9] Nevertheless, in 2015 the FAA promulgated the “Registration Rule,” which required owners of model aircraft to register their drones with the FAA.[10]  A model aircraft hobbyist challenged the Registration Rule, arguing that the FAA lacked the statutory authority to require the registration of model aircraft.[11]  In May 2017, the hobbyist won his challenge and the D.C. Circuit held the Registration Rule was unlawful to the extent that it applied to model aircraft due to Section 336.[12] Roughly one year later, in April 2018, the Commercial Drone Alliance (the “CDA”) called for Section 336 to be replaced with new language that would allow the FAA to regulate recreational drones in “a common sense way.”[13]  The Academy of Model Aeronautics—that advocates for the model aircraft community—issued a response to the CDA, arguing that the repeal of Section 336 would overtax the FAA’s limited resources by bringing hundreds of thousands of new drones within its purview, and would slow innovation spurred on by recreational drone enthusiasts.[14] Congress acted in the fall of 2018 when it introduced and signed into law the 1,2017-page FAARA bill.  FAARA incorporated a full repeal of Section 336,[15] and also included Section 349, which gave the FAA the authority to regulate recreational drones. Section 349 of FAARA creates a framework for the operation of model aircraft.  To avoid the need for specific certification or operating authority from the FAA, model aircraft must now (1) be flown strictly for recreational purposes; (2) be operated in accordance with a community-based organization’s set of safety guidelines developed in coordination with the FAA; (3) be flown within the visual line of sight of the operator or a visual observer co-located and in direct communication with the operator;[16] (4) be operated in a manner that does not interfere with manned aircraft; (5) not be flown in Class B, Class C, or Class D airspace or within the lateral boundaries of the surface area of Class E airspace designated for an airport without prior authorization; (6) be flown no higher than 400 feet above ground level; (7) be flown by an operator who has passed an aeronautical knowledge and safety test which is to be developed no later than 180 days after the Act’s passage; and (8) be registered and marked.[17] On October 12, 2018, the FAA released a statement regarding the passage of FAARA.[18]  The FAA acknowledged that, “[t]he Reauthorization Act cannot be fully implemented immediately,” and stated that operators should “follow all current policies and guidance with respect to recreational use of drones” while the FAA works to fully implement the new legislation.[19]

ii. Privacy

FAARA addresses privacy concerns raised by the unregulated usage of UAS.  It legislates to protect privacy interests with respect to both public and private activity.  On the public side, the law makes it the federal government’s policy to operate UAS “in a manner that respects and protects personal privacy consistent with the United States Constitution and Federal, State, and local law.”[20]  The section clarifies that the relative newness of drone regulation cannot justify unconstitutional and illegal searches.[21] FAARA further prompts the Comptroller General to review “privacy issues and concerns” raised by UAS operation in American airspace.[22]  The review will survey existing federal, state, and local laws protecting individual privacy against UAS intrusions, identify issues and deficiencies in these laws (including in their provision of civil and criminal remedies), and provide recommendations on how to address these issues and deficiencies.[23]  The review will draw from the experience of the Department of Transportation and the National Telecommunications and Information Administration, which have been wrestling with UAS-related privacy concerns since a 2015 executive order issued by former President Obama.[24] On the private side, FAARA suggests, but does not require, that private entities operating UAS for business purposes maintain a publicly available, written privacy policy that meets the federal government’s policy of operating UAS in a manner that respects applicable federal, state, and local law.[25]  FAARA clarifies that this suggestion does not extend to businesses operating for First Amendment purposes, and that the scope of the policy should correspond to the degree that data are collected, used, retained, and disseminated through UAS operations.[26] FAARA further establishes a centralized online database for all data collected from commercial and governmental UAS operators, which will be available at the Department of Transportation’s website no later than 270 days after FAARA’s enactment.[27]  The database will contain any waiver or authorization of UAS operations issued by governments at all levels.  These will be displayed in the system no later than 30 days from issuance.[28]  In addition, the database will contain a spreadsheet of UAS registrations, updated quarterly, which will “includ[e] the city, state, and zip code of each registered drone owner.”[29]  It also will specify the locations, times, and purposes of public UAS operations, as well as public drones’ technical capabilities.[30]  Finally, the database will detail information about each public and private drone that will collect individuals’ personally identifiable information.  The database will describe the circumstances under which each drone will be used, the kinds of information to be collected, and how that information will be used, disclosed, or otherwise handled.[31]  Information related to operations protected by the First Amendment will not be published in the database.[32]

iii. Enforcement and Federalism

As discussed below, FAARA has codified the U.S. Department of Transportation’s Unmanned Aircraft Systems Integration Pilot Program, seeking to incorporate UAS into American airspace by fostering collaboration between the private sector and federal and local governments.  FAARA, however, contains various other provisions that will mold the balance of state, tribal, and federal power in UAS regulation for years to come.  For starters, FAARA has removed restrictions on tribes’ operation of drones for public purposes such as emergency responses.[33]  In this way, the Act vests tribal authorities with the same rights as their state and local counterparts on matters involving search and rescue missions and the like.[34] FAARA also establishes a pilot program connecting state and local authorities that is designed to “utilize available remote detection or identification technologies” for law enforcement and oversight.[35]  The Act requires that the program establish a nationwide reporting and tracking system for illicit drone usage.[36]  And the Act also requires the FAA Administrator to “establish and publicize a mechanism” allowing both the general public and law enforcement authorities at all levels to report UAS suspected of operating in violation of federal law.[37]  This will likely involve the creation of a central database containing all such reports.[38]  Additionally, the Act requires the Administrator to submit an annual report for each of the five years comprising the duration of the program.[39]  The reports will detail the number of illicit UAS operations and enforcement cases brought by federal agencies, and will provide descriptions of the same.[40]  The reports also will issue recommendations for changes in the law regarding increased safety, mitigation, detection, and identification of unauthorized UAS operations. Finally, FAARA sets the stage for future policymaking through a comprehensive study and report “on the relative roles” of federal, state, local, and tribal governments in regulating low-altitude UAS operations.[41]  The study and report, which shall be submitted to Congress within 180 days of FAARA’s enactment, will consider the current shape of federal, state, local, and tribal low-altitude UAS law, including potential gaps between authorities.[42]  It will also assess the degree of regulatory consistency required for the industry’s safe and financially viable growth, the interests of governments at all levels affected by low-altitude UAS operations, and any infrastructure required for proper UAS monitoring and law enforcement.[43]

B. The FAA Commences Its Unmanned Aircraft Systems Drone Integration Pilot Program

On October 25, 2017, President Trump directed the U.S. Department of Transportation (“DOT”) to launch the Unmanned Aircraft Systems Integration Pilot Program (“IPP”), in order to test the “safe operation of drones in a variety of conditions” that the DOT currently prohibits, such as “operations over people, beyond line of sight, and at night.”[44]  The goal of the project, which will last three years, is to gather data to “form the basis of a new regulatory framework to safely integrate drones” into the national airspace.[45]   It also aims to balance the “benefits of innovation” against “the need to protect national security, public safety, critical infrastructure and the [National Airspace System].”[46] The IPP operates through unique private/public partnerships at a local level.  Under the IPP’s strictures, government localities partner with private sector businesses, develop concepts on how drones may be used to positively impact their communities, and apply to be one of 10 localities that the FAA selects for the pilot program.[47] Approximately 150 communities (and their private sector partners) applied for consideration under the IPP, and in May 2018, the DOT named the winners, which include state departments of transportation, universities, cities, and a Native American tribe.[48]  These localities partnered with major companies.[49]  The winners received waivers to conduct currently prohibited UAS activities, and will refine their operational concepts, and provide feedback and data to the FAA on their programs pursuant to memoranda of agreement.[50]   The projects include drone applications ranging from medical delivery, emergency management, urban and rural commercial delivery, pipeline inspection, border control, mosquito control, and other agricultural functions.[51] In August 2018, the FAA provided updates on the first four successful IPP test flights, including flights delivering medical supplies, performing certain agricultural functions, and one flight delivering an ice cream cone over a long distance.[52]

C. Developments in Low Altitude Authorization and Notification Capability (“LAANC”) System

The LAANC system represents a collaboration between the FAA and private companies to facilitate the sharing of airspace data.[53]  The LAANC “automates the application and approval process for airspace authorizations,” or, put simply, it allows for near real-time evaluation and approval of requests to fly drones in controlled airspaces.[54]  The speed with which LAANC is able to review and approve these applications makes the system attractive for frequent drone pilots and operators.  The FAA teams up with air traffic controllers and private companies, or service providers, who share airspace data to permit the speedy review and approval of airspace authorizations.[55] In order to become a service provider under LAANC, private companies must meet certain technical and legal requirements.  In 2018, the FAA approved nine new LAANC service providers, bringing the total number of service providers to 14.[56]  In 2019, the FAA set two windows for service-provider applications.  The first already closed, and was set between January 7 and February 9, and the second window will open on July 8 and close on August 9.[57]

D. The Department of Transportation’s Proposed Relaxation of Drone Flight Rules in 2019

On January 14, 2019, the U.S. Department of Transportation unveiled proposed rules that would allow drones to fly over people and at night without a waiver, as is currently required by Part 107, the small-drone rule.[58]  If these rules are passed, certain drones meeting design specifications such as weight and non-exposed propellers, will be exempted from Part 107’s waiver requirements.  The DOT is also proposing changes to the knowledge testing requirement:  in lieu of recurrent knowledge testing, the proposed rules would require recurrent training every 24 months.[59]  However, these proposed rules are contingent on the finalization of other rules and regulations that would allow for remote tracking and identification of drones.[60]

II.    Commercial Space Sector

A. Creation of Space Force

On March 23, 1983, former [GDC1] President Ronald Reagan gave a speech in the Oval Office calling for the creation of the Strategic Defense Initiative system.[61]  Nicknamed “Star Wars,” the Strategic Defense Initiative was intended to address any potential intercontinental ballistic missile attack.  The program called for a “network of ground-based and space-based systems to shield the country.”[62]  Over the course of the next decade, the initiative shifted focus and eventually became known as the Missile Defense Agency.[63] On June 18, 2018, President Donald Trump announced that he was directing the Pentagon to establish a Space Force, which at the time was slated to become the sixth branch of the U.S. military.[64]  While President Reagan’s Strategic Defense Initiative was focused on national defense, President Trump described the Space Force as focused on ensuring that the United States does not fall behind other global superpowers when it comes to its space program.[65]  After President Trump’s announcement, it became clear that a Space Force would require congressional approval, which has not yet been given.[66]  In fact, the Pentagon itself has historically opposed the creation of any space force.[67] Vice President Mike Pence unveiled the four components of the Space Force on August 9, 2018, at the Pentagon.  The first component—the U.S. Space Command—would be a new organization “led by a four-star general and will establish the space war-fighting doctrine, tactics, techniques and procedures.”[68]  The second component, the joint agency, would be called the Space Development Agency, and would contribute to the breakdown of bureaucratic tape that stifles the United States’ ability to innovate.[69]  The third component, the new war community, would be an elite group of “space officers” called “Space Operations Force,” and would provide crucial space-expertise support during “times of crisis and conflict.”[70]  And the final component would require naming a civilian to the post of Assistant Secretary of Defense for Space, who would be charged with bringing the Space Force to fruition, managing the Space Force’s expansion, and helping the critical transition to a fully independent Secretary of the Space Force.[71]  At the unveiling, Vice President Pence noted the need for such an independent space force due to competitors and potential adversaries such as Russia and China, who have developed weaponry and technology designed to destroy or interrupt existing U.S. satellites,[72]  and indicated the need for a new service branch to be approved by Congress. Following President Trump’s announcement, the Department of Defense (“DOD”) began taking the first steps toward creating the Space Force.  Leaders at the DOD planned to “stand up three of the four components” of the Space Force, which included the first three components described above—a new combatant command, a joint agency for the purchasing of satellites, and a new war community that pulls space-centric operators from all of the service branches.[73]  The fourth component, the creation of a separate branch of the U.S. military, is the one that requires congressional approval, but is unlikely to receive such approval for some time.[74] As the Pentagon was preparing plans for the Space Force, the White House changed course:  rather than focus on the creation of an independent, separate Space Force branch of the military, they would instead look at the varying ways in which the military’s space operations could be reorganized.[75]  The turnaround instruction from Scott Pace, the National Space Council’s Executive Secretary, asked the Pentagon to consider four options:  (1) Air Force-owned space corps including only Air Force assets; (2) Air Force-owned space corps that would include space-related troops and assets from the Army and Navy; (3) independent service that takes from the Air Force, Army, and Navy; and (4) an independent service that takes from the Air Force, Army, and Navy, and the intelligence community.[76] On December 18, 2018, President Trump issued a memorandum[77] regarding the establishment of a United States Space Command.  In addition, the memorandum called for the Secretary of Defense to recommend officers for nomination and confirmation as Commander and Deputy Commander of the Space Command.[78]  After months of deliberating, the Pentagon decided to place the Space Force under the Department of the Air Force.[79]  This new service would be overseen by a newly created undersecretary position, that would report to the Joint Chiefs.[80]  And while this legislative proposal is still in draft form, it is believed that the alignment of the Space Force under the Department of the Air Force is consistently supported across the Defense Department.[81]  Indeed, in the first month of 2019, acting Defense Secretary Patrick M. Shanahan reiterated the Pentagon’s stance that the Space Force be under the umbrella of the Air Force and have a “footprint” that is “as small as possible.”[82]

B. SpaceX Push for Fully and Rapidly Reusable Rockets

Private companies are also pushing ahead with a common goal of making space more accessible.  SpaceX’s Founder and visionary, Elon Musk, has said that the “fundamental breakthrough needed to revolutionize access to space” is reusability.[83]  Consistent with this message, SpaceX has embarked on a mission to develop fully and rapidly reusable rockets that do not burn up on re-entry, but rather can withstand the forces of re-entry and successfully land back on Earth. The company has made great strides since publicly announcing the program back in 2011.  In March 2018, SpaceX President Gwynne Shotwell reiterated that the company intended to fly reused boosters on at least half of the launches in 2018.[84]  Considering that the “technology” for reusable rockets truly emerged only a year ago, using reusable rockets on even half of 2018 flights was a remarkable achievement.[85]  On May 11, 2018, SpaceX debuted its Falcon 9 Block 5 rocket, which was able to flawlessly launch and complete a first-stage landing.  The end-goal, according to Mr. Musk, is to “demonstrate two orbital launches of the same Block 5 vehicle within 24 hours, no later than [2019].”[86]  According to Mr. Musk, perfecting reusable rocket technology could slash costs of spaceflight to the point where goals such as Mars’s colonization are economically feasible.  Accordingly, the technology behind the reusable rockets will eventually become the backbone of the company’s BFR spaceflight system. On October 7, 2018, SpaceX successfully delivered a satellite into orbit using its Falcon 9 rocket with a pre-flown first stage.[87]  And approximately eight minutes after liftoff, the first-stage booster made a successful return to Earth, only about a quarter-mile from its launch pad.[88]  Then, in December 2018, SpaceX launched its SSO-A SmallSat Express, which marked the third reuse of the particular booster on the Falcon 9.[89] In February 2019, SpaceX’s Falcon 9 launched three spacecrafts, including an Israeli moon-lander.  In March, SpaceX took a step towards manned flight when it launched a successful unmanned test mission of its Crew Dragon capsule, which conducted a six-day flight, autonomously docked with the International Space Station, and included a sensor-laden dummy to simulate having an astronaut aboard.  SpaceX plans to conduct another test flight of the capsule, and if also successful may use the capsule for a manned space flight later this year. SpaceX is also pressing forward with its plans for commercialization of space travel,[90] with plans to launch its first private space flight in 2023.[91]

C. Updates on Space Law in the United Arab Emirates

In October 2018, the United Arab Emirates adopted a new space law intended to facilitate the country’s recent efforts to participate in the global space sector and space exploration, encourage investment and research, form the basis for multilateral affiliations with other nations, and regulate the rapidly developing regional industry.[92]  While details of the new law are not yet publicly available, press reports note that NASA and the UAE space agency (“UAESA”) also signed an implementing agreement on October 2, 2018, in order to facilitate astronaut training and UAESA access to the International Space Station (“ISS”).[93]  The new law follows on the heels of the cooperation agreement signed by NASA and UAESA in June 2016, which formalizes plans to collaborate with respect to aeronautics research and the use of airspace and outer space, including cooperation in the exploration of Mars.[94]  UAE has been strategically expanding its space missions over the past several years:  for example, international note has been taken of its 2021 Mars Hope mission,[95] and a UAE astronaut is currently set to fly to the ISS with Russian space agency Roscosmos in April 2019.[96]

D. Update on Outer Space Treaty

Amidst rapid technological developments and a shift in international rhetoric surrounding the commercialization and militarization of space, the 1967 Outer Space Treaty is looking increasingly out of date.[97]  Recent moves by several countries to flex military muscle in space races have tested the boundaries of the 50-year-old treaty—developed under the auspices of the Cold War and the Space Race[98]—which bans the placement of weapons of mass destruction in space (although it provides less explicit guidance about other military uses of space), forbids any military action past the atmosphere, and declares the exploration of space a common good for the benefit of all countries.[99] Against this backdrop, the UN Office for Outer Space Affairs (“UNOOSA”) hosted the UN Conference on the Exploration and Peaceful Uses of Outer Space in Vienna on June 18, 2018, during which international delegates passed a Resolution to strengthen global cooperation in space and the use of space for sustainable development.[100]  However, current international efforts fall short of addressing what happens when space rights conflict or when it is lawful for nations to resort to hostilities in or through space.[101]  In the absence of concrete shared norms regulating, for example, the use of conventional weaponry in space or the increased activity by private commercial actors, the gaps in the existing international legal regime loom large. Key assumptions of long-standing space diplomacy are being destabilized, causing uncertainty about how some of the recent developments fit into the existing legal framework.[102]  For example, the EU’s Galileo satellite proposes “more civil-military synergies in European space systems,”[103] and, as noted above, plans for the U.S.’s Space Force are proceeding.[104]  In March 2018, the U.S. House of Representatives approved the American Space Commerce Free Enterprise Bill.  Moreover, the proliferation of space debris and a growing interest in asteroid mining[105] raises issues concerning the treaty’s provision on the prevention of harmful contamination of celestial bodies, and highlights the fact that the treaty does not deal with the issue of mineral rights.[106]  And, constellations of satellites launched for commercial purposes pose a challenge to space traffic management.[107] Currently, the limits of regulatory authority appears to leave space open for the taking,[108] raising inevitable conflict with the Outer Space Treaty’s ideals of public ownership.  Nor is there an internationally agreed-upon legal definition of space and its boundaries, posing an additional challenge to global governance and multilateral regulation and cooperation.[109]

E. Overhaul in Commercial Space Licensing

i. Overview

The general trend of 2018 was toward a more streamlined commercial space licensing process.  On May 24, 2018, President Trump ordered a sweeping regulatory overhaul to encourage commercial space innovation.[110]  The presidential memorandum, titled Space Policy Directive-2 (SPD-2) instructs the Department of Transportation to review the space launch and re-entry licensing process and, by February 2019, implement changes that would make the licensing process more efficient and less burdensome to private enterprise.  The directive specified aspects of the licensing process that ought to receive special attention, including the possibility of requiring just one license for all forms of commercial space launch and re-entry.[111]  In addition, SPD-2 orders Transportation Secretary Elaine Chao to coordinate efforts with the National Space Council, which in February 2018 issued four recommendations regarding commercial space licensing:

1.   The Secretary of Transportation should work to transform the launch and re-entry licensing regime.

2.   The Secretary of Commerce should consolidate its space commerce responsibilities, other than launch and re-entry, in the Office of the Secretary of Commerce.

3.   The National Telecommunication and Information Administration should coordinate with the Federal Communications Commission to ensure the protection and stewardship of radio frequency spectrum necessary for commercial space activities.

4.   The Executive Secretary of the National Space Council, in coordination with members of the National Space Council, should initiate a policy review of the current export licensing regulations affecting commercial space activity.[112]

This directive came on the heels of a bill passed by the House of Representatives in April 2018, titled the American Space Commerce Free Enterprise Act (“ASCFEA”), which aimed to streamline the commercial space licensing process by consolidating each step of the process under the authority of the Commerce Department’s Office of Space Commerce.[113]  To put the process as it currently stands into perspective, the FAA handles launch and re-entry licensing issues, the Federal Communications Commission (“FCC”) approves radio communications between the spacecraft and its handlers on the ground, and the National Oceanic and Atmospheric Administration (“NOAA”) oversees satellite operations.[114] Indeed, shortly after the White House unveiled SPD-2, the Department of Commerce announced that it planned to combine several existing offices into a new office called the Space Policy Advancing Commercial Enterprise (“SPACE”) Administration, thus effectuating much of what the ASCFEA sought to accomplish.[115]  Specifically, the SPACE Administration will incorporate the Commercial Remote Sensing Regulatory Affairs (“CRSRA”) office and the Office of Space Commerce, currently part of the NOAA, as well as require liaisons to be assigned to the office from the Bureau of Industry and Security, International Trade Administration, National Institute of Standards and Technology, NOAA, and National Telecommunications and Information Administration.

ii. Expedited Review

Officials at the CRSRA office, a subset of the NOAA, announced at an April 3, 2018 meeting of the Advisory Committee on Commercial Remote Sensing that they have substantially cut the average review time for commercial Earth imaging system license applications.[116]  In 2017, the CRSRA completed reviews of license applications in 91 days, on average, down from 140 days in 2016 and 210 days in 2015.  Moreover, only two in 16 applications took more than 120 days to review, and those that did usually only took a few additional days.  By contrast, over half of all applications took longer than 120 days to review in 2016, and only one in 15 applications was reviewed within 120 days in 2015. CRSRA officials attributed the more streamlined review process in part to a memorandum of understanding between the Departments of Commerce, State, Defense, the Interior, and the Office of the Director of National Intelligence, which established procedures for interagency reviews of remote sensing license applications.  The office also pointed to the fact that more and more organizations are contacting CRSRA in advance to inquire whether their proposed activities require a license.  In 2017, 47 entities contacted the office (a 14% increase from 2016), 19 of which required a license. On October 23, 2018, the Department of Commerce announced that it had submitted to the Office of Management and Budget (“OMB”) a draft rule that would revise the commercial remote licensing processes.[117]  Acting Deputy Secretary of Commerce Karen Dunn Kelley announced that the proposed rule “will revolutionize the way we regulate the use of cameras in space” by, among other things, creating categories that exempt certain pre-approved activities from the license application process.  The impetus for the new draft rule came at least in part from the public attention the Department attracted earlier in the year, when SpaceX had its livestream of a Falcon 9 rocket launching 10 Iridium Next Satellites into orbit cut off nine minutes after liftoff, after finding out that such activity required a license from NOAA.[118]  Acting Deputy Secretary Kelley referenced the incident in her remarks.  “SpaceX’s GoPro camera, that is used for marketing and shows customers that the payloads have successfully been separated, should not be treated in the same way as the highly technical camera that can see your shoelaces from space,” she said.

iii. Developments in Department of Commerce, Including Export Control and Foreign Investment

Following the White House’s announcement of SPD-2, Commerce Secretary Wilbur Ross, along with other department officials, stated at the June 18, 2018 meeting of the National Space Council and related events over the following days that the administration is making progress on a number of SPD-2’s areas of focus.[119]  One development was the announcement that the Office of Space Commerce, which for years had gone without a permanent director, would be headed by Kevin O’Connell who is also slated to head the newly announced SPACE Administration once it is formally established. Perhaps more significantly, Secretary Ross announced that interagency discussions were set to begin regarding how to implement space export control reform.  Among the most important topics to be discussed is the issue of which items and technologies ought to remain on the United States Munitions List (“USML”)—which is subject to the jurisdiction of the International Traffic in Arms Regulations (“ITAR”)—and which technologies and items ought to be moved to the Commerce Control List, which is a less-restrictive export control system administered by the Department of Commerce.  Executive Secretary of the National Space Council Scott Pace stated at the Users’ Advisory Group meeting that he believed, generally speaking, what is “on the USML right now probably belongs on the USML,” and hence that the interagency discussions will largely focus on removing from the USML process-related technologies such as outdated computer systems.  In contrast, at the June 14 meeting of the Commercial Space Transportation Advisory Committee (“COMSTAC”), which advises the Federal Aviation Administration’s Office of Commercial Space Transportation, COMSTAC Chairman Mike Gold stated that “we should not rest on our laurels” when it comes to export control reform.  In his view, the goal of interagency discussions would be the “elimination of export controls for technologies that are widely available on the international market.” A second goal of the discussions was encouraging more international investment in, and business for, American space companies.  Although Secretary Ross held a brief armchair discussion with executives from space companies at the SelectUSA Investment Summit, no foreign investment deals were announced.  But in August 2018, Director O’Connell gave a speech at a space conference at Arizona State University, in which he stated that the Office of Space Commerce’s role in advocating for international investment was to ensure that American companies “have fair market access and are able to compete freely” as other countries develop their regulatory approach to space.[120]  We will be sure to discuss the extent to which the Office of Space Commerce succeeds in this advocacy effort in our next update.

F. Office of Commercial Space Transportation’s Increased Spending Budget

FAARA (previously discussed in Section __, supra) substantially increased the FAA Office of Commercial Space Transportation’s spending budget.  The FAA allotted approximately $22.6 million to the Office in Fiscal Year (“FY”) 2018.  Over the next five years, however, the budget will increase as follows:
  • FY 2019:  $33,038,000
  • FY 2020:  $43,500,000
  • FY 2021:  $54,970,000
  • FY 2022:  $64,449,000
  • FY 2023:  $75,938,000[121]
The funding is not without strings, however.  For example, the bill created an “Office of Spaceports,” which is tasked with licensing commercial launch sites and developing procedures and policies to improve their facilities.[122]  The Office will need to report to Congress on or before October 3, 2019, with recommendations for federal actions to “support, encourage, promote, and facilitate greater investments in infrastructure at spaceports.”[123]  The bill also requires that the head of the Office work with a point-person at the FAA on issues related to national airspace and commercial launch activity.[124]

III.    Export control reform act and cfius update

The John S. McCain National Defense Authorization Act for Fiscal Year 2019 (“FY 2019 NDAA”), which became law on August 13, 2018, contained two pieces of legislation that will have significant impacts on investment and technology transfers in the aerospace and related sectors for decades to come.  The FY 2019 omnibus bill contained the Foreign Investment Risk Review Modernization Act (“FIRRMA”), which amended the law that provides the Committee on Foreign Investment in the United States (“CFIUS” or “the Committee”) with its authority.  It also included the Export Control Reform Act of 2018 (“ECRA”), and gives the President, acting through the Secretary of Commerce, a mandate and new authorities to restrict the outbound transfer of “emerging and foundational technologies” and requires the Secretary of Commerce to include the health of the U.S. national defense industrial base as a factor when evaluating export control license applications.  Both are likely to have significant effects, including a rerouting of geography of investment flows and cross-border technology collaboration in aerospace and related technologies going forward.

A. Expanded Oversight of Inbound Investment Through CFIUS

CFIUS is an interagency committee authorized to review the national security implications of investments made by foreign companies and persons in U.S. businesses (“covered transactions”), and to either block or impose measures to mitigate any threats to U.S. national security.[125]  Established in 1975 and last reformed in 2007, the Committee’s ability to review the national security implications posed by an increasing number of Chinese investments targeting sensitive technologies in the United States was viewed by many as stymied by its statutory and regulatory framework. Prior to FIRRMA, CFIUS was limited to reviewing transactions which resulted in the ownership or control of U.S. businesses by foreign persons.  FIRRMA expands the scope of transactions subject to the Committee’s review by granting CFIUS the authority to examine non-controlling investments in U.S. businesses that deal with critical infrastructure, critical technology, or the personal data of U.S. citizens.  These non-controlling investments include any investment by a foreign person in an unaffiliated U.S. business or a “change in the rights that a foreign person has” with regard to any U.S. business that:
  • owns, operates, manufactures, supplies or services critical infrastructure;
  • produces, designs, tests, manufactures, fabricates or develops one or more critical technologies; or
  • maintains or collects sensitive personal data of United States citizens that may be exploited in a manner that threatens national security.
The term “critical technologies” is specially, and now more broadly, defined.[126]  It includes:  the defense articles and services described on the International Traffic in Arms Regulations (“ITAR”) United States Munitions List (“USML”); certain technologies identified on the Export Administration Regulations (“EAR”) Commerce Control List (“CCL”); nuclear facilities and equipment identified in 10 C.F.R. Part 110; and select agents and toxins.[127]  While many aerospace and associated technologies are already identified on the USML and the CCL, FIRMA expanded the critical technologies definition to include emerging and foundational technologies (hereinafter, “EFT”).[128]  The critical technologies concept thus includes many existing military and civil aerospace technologies and will now also include many technologies that many companies are relying on to develop the next generation of products in these and related sectors. Indeed, in CFIUS’s recently launched pilot program[129] to implement a new mandatory declaration filing requirement for non-controlling investments in companies involved in critical technologies, multiple sectors relevant to aerospace were targeted, including:  Guided Missile and Space Vehicle Manufacturing; Guided Missile and Space Vehicle Propulsion Unit and Propulsion Unit Parts Manufacturing; Aircraft Manufacturing; Aircraft Engine and Engine Parts Manufacturing; Powder Metallurgy Part Manufacturing; Search, Detection, Navigation, Guidance, Aeronautical, and Nautical System and Instrument Manufacturing; Secondary Smelting and Alloying of Aluminum; and Turbine and Turbine Generator Set Units Manufacturing. Although FIRRMA contains an express carve-out for completely passive investment structures found in the private equity space, the prospect of CFIUS review of even non-controlling investments is already causing some foreign investors, particularly those in Asia, to forgo attempts to make investments in these sectors.

B. Regulation of Outbound Technology Transfer Through Export Controls

Part of the impetus behind FIRRMA were studies which showed how non-U.S. companies, and especially Chinese companies, have been participating in a range of venture capital investments in early-stage, innovative technology companies.[130]  Congress was particularly concerned that China was using national investment policies and private sector commercial arrangements to force U.S. companies to provide their Chinese counterparts with access to basic and advanced technologies that would enable China to leapfrog decades of technological development and pose an even larger economic and strategic threat to the United States and its allies.  Indeed, these policies arrangements, such as technology transfer for market access arrangements, have been critical to the development of China’s aerospace sector, among others.[131] Congress also heard from observers who sounded an alarm noting that, over time, certain foreign investors had modified their investment strategies in emerging technologies to venture capital and green field investments,[132] which CFIUS lacked jurisdiction to review and block.  The realization that foreign technology transfers involving critical technologies were being insufficiently monitored and regulated prompted Congress to give the U.S. government new authorities under ECRA to control outbound flows of technology. To help regulate these transfers, ECRA requires the President to establish, in coordination with the Secretaries of Commerce, Defense, Energy, and State, a “regular, ongoing interagency process to identify [EFT]” that are essential to national security but not yet captured by any other critical technology list.  As these EFT technologies are identified, the Secretary of Commerce is to establish controls on the export, re-export, or in-country transfer of such technology, including requirements for licenses or other authorizations. To begin the process of identifying EFT, Commerce’s Bureau of Industry and Security (“BIS”) issued an Advanced Notice of Proposed Rule Making in November 2018, seeking public comments on how to identify emerging technologies, which we discuss at greater length here.[133]  In the notice, BIS broadly describes emerging technologies as “those technologies essential to the national security of the United States that are not already subject to export controls under the [EAR or ITAR].”[134]  The ANPRM suggests that technologies will be considered “essential to the national security of the United States” if they “have potential conventional weapons, intelligence collection, weapons of mass destruction, or terrorist applications or could provide the United States with a qualitative military or intelligence advantage.”[135] Although the ANPRM does not provide concrete examples of “emerging technologies,” BIS provided a list of broad areas of technology it viewed as subject to limited controls that could be considered “emerging” and therefore subject to new, broader controls under ECRA once specific technologies were identified.  These include many that are critical to current day and next generation technologies such as AI and Machine Learning; Position, Navigation and Timing; Microprocessors; Logistics; Robotics; Hypersonics; Additive Manufacturing; and Advanced Materials.  BIS has not yet issued an ANPRM that would show its hand on candidates for “foundational technology” controls. Once specific EFT are identified, companies can expect that their proposed exports of these technologies will be subject to greater scrutiny, and at least for some countries, subject to a licensing policy of denial.  This is because ECRA also obligates Commerce to gather and consider the kinds of information on foreign ownership that would normally be included in CFIUS submissions prior to its grant of an export license for EFT.  For example, if a proposed export transaction involves a joint venture, joint development agreement, or similar collaborative arrangement involving EFT, Commerce is to “require the applicant to identify, in addition to any foreign person participating in the arrangement, any foreign person with significant ownership interest in a foreign person participating in the arrangement.”[136] This requirement will significantly increase the diligence companies working with these technologies will need to conduct on their counterparties, and at least some counterparties are likely to walk away from proposed transactions in order to avoid having to provide sensitive information regarding their ownership.  In addition, the new information gathered on foreign person participation and ownership is likely to lead Commerce to block transactions by denying license applications.  The blocks are likely to impact not just direct transactions with companies in countries that are likely to be targeted with enhanced controls, such as China, but also exports to subsidiaries of Chinese companies located in Europe and elsewhere.  They may also reach inside the United States insofar that Commerce could opt to deny export licenses filed by U.S.-based subsidiaries or affiliates of such companies to export technology back to their parent country or to share technology with their foreign national employees. ECRA also introduced two new policy considerations for export license determinations that arguably shift U.S. export control policy from a more free trade to a protectionist stance.  Historically, Commerce was required to restrict the export of goods or technology that would significantly contribute to the military potential of other countries but to limit export controls to only those items that were militarily critical goods and technologies.[137]  Through these and other express policy objectives, Congress sought to promote export activity and to restrict it only when necessary.  Now under ECRA, Commerce is to regulate exports so as to help preserve the qualitative military superiority of the United States and to build and maintain the U.S. defense industrial base.  In particular, when assessing export license applications, Commerce is to require applicants to provide information that would enable it to determine whether the purpose or effect of the export would be to allow for the production of items relevant to national defense outside of the United States.[138]  If the proposed export would have a “significant negative impact” on the U.S. defense industrial base, Commerce is to deny license applications.  Proposed exports would have such “significant negative impacts” if they meet any one of three criteria:
  • Whether the export would have the effect of reducing the availability or production of an item in the United States that is likely to be required by the DOD or other federal department or agency for the advancement of national security;
  • Whether the export would lead to a reduction in the production of an item in the United States that is the result of research and development carried out, or funded by the DOD or other federal department or agency, or a federally funded research and development center; and
  • Whether the export would lead to a reduction in the employment of U.S. persons whose knowledge and skills are necessary for the continued production in the United States of an item that is likely to be acquired by the DOD or other federal department or agency for the advancement of national security.[139]
While it is unclear how Commerce will specifically implement these new policy and licensing directives, we predict that many companies seeking to export many aerospace and EFT will find it more difficult going forward.  Not only will they be required to provide more information regarding their proposed counterparties in their export license applications, such as information on their counterparties’ ultimate ownership and their role in the U.S. defense industrial base, but Commerce will likely deny applications when key strategic competitors of the United States are involved.

IV.    GOVERNMENT CONTRACTS LITIGATION IN THE AEROSPACE AND DEFENSE INDUSTRY

Gibson Dunn’s 2018 Year-End Government Contracts Litigation Update and 2018 Mid-Year Government Contracts Litigation Update cover the waterfront of the most important opinions issued by the U.S. Court of Appeals for the Federal Circuit, U.S. Court of Federal Claims, Armed Services Board of Contract Appeals (“ASBCA”), and Civilian Board of Contract Appeals among other tribunals.  We invite you to review those publications for a full report on case law developments in the government contracts arena. In this update, we summarize key court decisions related to government contracting from 2018 that involve players in the aerospace and defense industry.  The cases discussed herein, and in the Government Contracts Litigation Updates referenced above, address a wide range of issues with which government contractors in the aerospace and defense industry are likely familiar.

A. Select Decisions Related to Government Contracts in the Aerospace and Defense Industry

The Boeing Co., ASBCA No. 60373 (July 17, 2018)
The ASBCA (D’Alessandris, A.J.) held that software developed with costs charged to technology investment agreements (“TIAs”) pursuant to 10 U.S.C.A. § 2358 constitutes software developed “exclusively at private expense” as it is defined in Defense Federal Acquisition Regulation Supplement (“DFARS”) clause 252.227-7014, Rights in Noncommercial Computer Software and Noncommercial Computer Software Documentation.  The ASBCA also held that the TIAs at issue did not make a blanket grant of government purpose rights in nondeliverable software developed with costs charged to the TIAs.  The dispute arose under a low-rate initial production (“LRIP”) contract, after Boeing delivered software marked with restrictive rights and asserted that the software had been developed exclusively at private expense pursuant to the TIAs.  The government challenged Boeing’s assertion of restricted rights in the software, and asserted that it possessed government purpose rights because the software was developed with mixed funding.  The ASBCA found that a TIA is a cooperative agreement, and not a “contract” as defined in FAR 2.101.  Accordingly, to the extent that the software was funded by the TIAs, the costs were not allocated to a government contract and satisfy the definition of “developed exclusively at private expense” under DFARS 252.227-7014.  For the same reason, the ASBCA found that the expenditures do not satisfy the definition of “developed with mixed funding” because the costs charged to the TIAs were not charged directly to a government contract.
Aerospace Facilities Grp., ASBCA No. 61026 (July 19, 2018)
The CDA mandates that an appeal of a contracting officer’s final decision must be filed at the Boards of Contract Appeals within 90 days of the contractor’s receipt of the decision, or must be filed at the Court of Federal Claims within 12 months.  41 U.S.C. § 7104. The government terminated Aerospace Facilities Group (“AFG”)’s contract for cause, and AFG filed its notice of appeal at the ASBCA 91 days after receipt of the termination decision by email.  However, following its termination decision, the government engaged in numerous communications with AFG inviting the contractor to discuss proposals to resolve the termination, including the potential delivery of items under the contract that the government had purported to terminate.  The ASBCA (Shackleford, A.J.) denied the government’s motion to dismiss for lack of jurisdiction based on the alleged untimeliness of the notice of appeal (which the ASBCA also questioned sua sponte).  The ASBCA held that the government’s post-termination actions “created a cloud of uncertainty as to the status of the . . . termination.”  As such, the government led AFG to reasonably believe that it was reconsidering the termination decision, thereby vitiating the finality of the “final” decision.
Hartchrom, Inc., ASBCA No. 59726 (July 26, 2018)
A common issue arising before the tribunals that hear government contracts disputes is whether the contractor appealed a valid CDA claim.  FAR 33.201 defines a “claim” as “a written demand or written assertion by one of the contracting parties seeking, as a matter of right, the payment of money in a sum certain, the adjustment or interpretation of contract terms, or other relief arising under or relating to this contract.”  Under the CDA, a claim for more than $100,000 must be certified. Hartchrom, Inc. had a lease with a private party allowing Hartchrom to use space at an Army manufacturing facility (the “Arsenal”).  The government was not a party to the lease.  Hartchrom later entered into a contract with the Army for chrome electroplating services, which Hartchrom performed at the Arsenal.  The lessor directed Hartchrom to remove hazardous waste that Hartchrom had discharged into the industrial wastewater treatment plant while performing its Army contract.  Hartchrom submitted a claim to the Army contracting officer for the hazardous waste removal costs, which the contracting officer denied in a final decision.  The ASBCA (Osterhout, A.J.) held that it had jurisdiction over the appeal because the claim was made pursuant to the Army contract and appealing a valid final decision.  However, the ASBCA dismissed the appeal for failure to state a claim upon which relief may be granted, because any relief to which Hartchrom could be entitled would have been under the terms of its lease with the private party.  Indeed, the clause Hartchrom relied upon was a provision in the lease, not in the Army contract.  Thus, the ASBCA had no way to grant Hartchrom any relief, even if it was so entitled under the lease.
The Boeing Co., ASBCA Nos. 61387, 61388 (Nov. 28, 2018)
The ASBCA (O’Connell, A.J.) denied Boeing’s motion for summary judgment seeking the ASBCA’s interpretation as to whether the contracts at issue allowed Boeing to place certain marking legends on technical data, or whether the only authorized legends for marking technical data under the contracts were those found in DFARS 252.227-7013(f).  The Air Force contracting officer had concluded that because the legends used by Boeing to mark its data did not conform with DFARS 252.227-7013(f) that Boeing must remove them at its own expense and resubmit the data.  Boeing argued that the DFARS clauses, as interpreted by the Air Force, failed to protect its intellectual property rights, whereas the Air Force claimed it would be harmed by use of Boeing’s non-DFARS proposed legends.  In denying Boeing’s motion, the ASBCA agreed with the government’s interpretation of DFARS 252.227-7013(f), finding that the legends authorized by that clause were the only permissible legends for limiting data rights under the contract.  However, the ASBCA also noted that the issue of whether those clauses adequately protect Boeing’s property rights could not be resolved based on the record developed to date.  Accordingly, the Board directed the parties to submit a joint status report proposing further proceedings.
Charles F. Day & Associates LLC, ASBCA Nos. 60211, 60212, 60213 (Nov. 29, 2018)  
Charles F. Day & Associates LLC (“CFD”) contracted to perform services for the Army in Iraq.  The personnel supplied by CFD performed work outside the scope of the written requirements of CFD’s contract in support of their customer, and later sought additional compensation for those efforts.  CFD submitted a Request for Equitable Adjustment delineating three separate requests for payment, which the Board characterized as “claims,” observing in a footnote that a request for equitable adjustment can be considered a claim under the CDA, regardless of its title, if it otherwise meets the requirements of a claim.  The contracting officer denied CFD’s claims, arguing that there had been no constructive change to the contract and that CFD thus had no entitlement to additional compensation. The government argued that the Board lacked jurisdiction to consider a portion of the case presented by CFD at the hearing, alleging that the basis of that claim (essentially a superior knowledge claim) was so different from that presented to the contracting officer that it should be dismissed.  The Board granted the government’s request to dismiss the additional issue raised at the hearing, noting that while the board is “relatively liberal in permitting appellants to present additional evidence and arguments not presented to the contracting officer and to alter the legal bases for claims on the amount of damages,” “a claim on one matter does not support jurisdiction over an appeal on another” and “a claim must be specific enough and provide enough detail to permit the contracting officer to enter into dialogue with the contractor.”  Although the Board agreed with CFD that the legal theory for the claim presented at trial was the same as in its claim—seeking recovery for out of scope work—the Board nevertheless found that the claim did not arise from the same underlying facts, and thus the factual basis for the claim presented at trial was not brought before the contracting officer in CFD’s written claims.
Ballistic Recovery Systems, Inc., ASBCA No. 61333 (Dec. 13, 2018)
In 2016, Ballistic Recovery Systems, Inc. (“BRSI”) entered into a fixed-price contract for the supply of parachute deployment sleeves.  Pursuant to the contract, BRSI was supposed to deliver two test units for inspection, as part of the first article test (“FAT”).  Prior to the award of the contract, BRSI sought an FAT waiver based on a prior contract for the same item, however, the waiver was denied because no inspections had been performed on BRSI’s deployment sleeves for almost two years.  After delivery of the two test units, the government found numerous major deficiencies and recommended disapproval.  After BRSI submitted two subsequent test units, the government found further major deficiencies, and issued a show-cause notice for BRSI to state any excusable causes of defects.  Rather than address any of the major deficiencies in the test units, BRSI referred to its earlier contract and argued that its units were “production standard.”  In 2017, the government terminated the contract for default as a result of the multiple FAT disapprovals. Upon the government’s motion for summary judgment, the ASBCA (Paul, A.J.) determined that the government met its initial burden of proving that the termination was reasonable and justified, and evidence that the contractor did not attempt to correct major and critical defects constituted a reasonable basis for default termination.  The ASBCA reasoned that the government had provided ample evidence of the major and critical failures of BRSI’s test units, and had submitted declarations in support thereof, thus, the lack of any substantive attempt by BRSI to address the faulty units constituted a reasonable basis for default termination.  Accordingly, the ASBCA denied BRSI’s appeal.

V.    Conclusion

We will continue to keep you informed on these and other related issues as they develop.

  [1]   Tom Metcalfe, Pseudo-Satellite Drone Flies for 25 Days Straight, Sets Endurance Record, Life Science (Aug. 20, 2018), available at https://www.livescience.com/63378-pseudo-satellite-drone-record.html.
  [2]   Malek Murison, UK Police Use Drone to Catch Deer Poachers, Drone Life (Oct. 23, 2018), available at https://dronelife.com/2018/10/23/uk-police-drone-thermal-camera-deer-poachers/.
  [3]   Transforming Accident Investigation with Drones, Drone Deploy (July 23, 2018), available at https://blog.dronedeploy.com/transforming-accident-investigation-with-drones-edec7162d8ce.
  [4]   Federal Aviation Administration Reauthorization Act (“FAAA”), H.R. 302, 115th Cong. § 2 (2018).
  [5]   Ben Mutzabaugh, President Trump signs bill that will regulate airline seat sizes, USA Today (Oct. 5, 2018), available at https://www.usatoday.com/story/travel/flights/todayinthesky/2018/10/05/trump-signs-faa-reauthorization-bill-regulate-seat-sizes/1537513002/.
  [6]   Jeff Foust, Congress includes space provisions in FAA bill as industry seeks action on other regulatory issues, Space News (Sept. 23, 2018), available at https://spacenews.com/congress-includes-space-provisions-in-faa-bill-as-industry-seeks-action-on-other-regulatory-issues/.
  [7]   Ben Husch, Congress Passes 5-Year FAA Reauthorization Act, National Conference of State Legislatures (Oct. 4, 2018), available at http://www.ncsl.org/blog/2018/10/04/congress-passes-5-year-faa-reauthorization-act.aspx.
  [8]   FAA, FAA Reauthorization Bill Establishes New Conditions for Recreational Use of Drones (Oct. 12, 2018), available at https://www.faa.gov/news/updates/?newsId=91844.
  [9]   See Taylor v. Huerta, 856 F.3d 1089, 1090 (D.C. Cir. 2017).
[10]   Miriam McNabb, Federal Appeals Court Finds Drone Registration Unlawful for Model Aircraft, Drone Life (May 19, 2017), available at https://dronelife.com/2017/05/19/federal-appeals-court-finds-model-aircraft-registration-unlawful/.
[11]   See Taylor, 856 F.3d at 1090.
[12]   Id. at 1093.
[13]   Miriam McNabb, The Argument Over Section 336: AMA Responds for Calls to Repeal, Drone Life (Apr. 5, 2018), available at https://dronelife.com/2018/04/05/argument-section-336-ama-responds-calls-repeal/.
[14]   Id.
[15]   Miriam McNabb, FAA Reauthorization Explained: Part 1, the Repeal of Section 336, Drone Life (Sept. 25, 2018), available at https://dronelife.com/2018/09/25/faa-reauthorization-explained-part-1-the-repeal-of-section-336/.
[16]   Later in October, the FAA approved Avitas Systems’ request to forgo the “line of sight” requirement in order to conduct industrial inspections of oil fields, possibly “setting a new precedent for commercial drone operations.”  Daniel Wilson, FAA OKs Drone Operation With Radar Beyond Line Of Sight, Law360 (Oct. 18, 2018), available at https://www.law360.com/texas/articles/1093243/faa-oks-drone-operation-with-radar-beyond-line-of-sight.
[17]   PL 115-254, 2018 HR 302, PL 115-254, October 5, 2018, 132 Stat 3186.
[18]   Federal Aviation Administration, FAA Reauthorization Bill Establishes New Conditions for Recreational Use of Drones, FAA (Oct. 12, 2018), available at https://www.faa.gov/news/updates/?newsId=91844.
[19]   Id.
[20]   FAA Reauthorization Act of 2018, H.R. 302, Division B, § 357 (2018).
[21]   Miriam McNabb, FAA Reauthorization Explained: Part 3, Privacy, DroneLife (Sept. 27, 2018), available at https://dronelife.com/2018/09/27/faa-reauthorization-explained-part-3-privacy/.
[22]   FAA Reauthorization Act of 2018, H.R. 302, Division B, § 358 (2018).
[23]   Id.
[24]   Id.
[25]   Id. § 378.
[26]   Id.
[27]   Id. § 379.
[28]   Id.
[29]   Id.
[30]   Id.
[31]   Id.
[32]   Id.
[33]   Id, § 355.
[34]   Joel Roberson & Jennifer Nowak, How the FAA Reauthorization Accelerates Drone Integration, Law360 (Nov. 18, 2018), available at https://www.law360.com/articles/1103065/how-the-faa-reauthorization-accelerates-drone-integration.
[35]   FAA Reauthorization Act of 2018, H.R. 302, Division B, § 372 (2018).
[36]   Miriam McNabb, FAA Reauthorization Explained: Part 2, Enforcement, DroneLife, (Sept. 26, 2018), available at https://dronelife.com/2018/09/26/faa-reauthorization-explained-part-2-enforcement/.
[37]   FAA Reauthorization Act of 2018, H.R. 302, Division B, § 372 (2018).
[38]   McNabb, supra, note 6.
[39]   FAA Reauthorization Act of 2018, H.R. 302, Division B, § 372 (2018).
[40]   Id.
[41]   Id. § 373.
[42]   Id.
[43]   Id.
[44]   See Unmanned Aircraft Systems Integration Pilot Program, 82 FR 50301 (Oct. 25, 2017), available at https://www.federalregister.gov/documents/2017/10/30/2017-23746/unmanned-aircraft-systems-integration-pilot-program; UAS Integration Pilot Program Overview, U.S. Department of Transportation (May 7, 2018), available at https://www.faa.gov/uas/programs_partnerships/uas_integration_pilot_program/; UAS Integration Pilot Program Selection Announcement, U.S. Department of Transportation (May 9, 2018), available at https://www.transportation.gov/briefing-room/uas-integration-pilot-program-selection-announcement.  The Federal Aviation Administration Reauthorization Act of 2018 grants the FAA the legal authority to implement the IPP.  See H.R. Rep. No. 302 Sec. 351 (2018), available at https://bit.ly/2DLNW0O.
[45]   See Miriam McNabb, FAA: Drone Integration Pilot Program Off to an Exciting Start, DroneLife (Aug. 30, 2018), available at https://dronelife.com/2018/08/30/faa-ipp-off-to-an-exciting-start/; see Matt Leonard, Governments Dream of Drone-Based Development, GCN (Feb. 8, 2018), available at https://gcn.com/articles/2018/02/08/drone-ipp-applicants.aspx.  The FAA has also stated that it intends to use the IPP to test “package delivery, detect-and-avoid technologies, counter-UAS security operations, reliability and security of data links between pilot and aircraft, as well as local management of UAS operations subject to FAA oversight.”  Id.
[46]   See Integration of Civil Unmanned Aircraft Systems (UAS) in the National Airspace System (NAS) Roadmap, Second Edition, Federal Aviation Administration, at 32 (July 2018), available at https://www.faa.gov/uas/resources/uas_regulations_policy/media/Second_Edition_Integration_of_Civil_UAS_NAS_Roadmap_July%202018.pdf.
[47]   See UAS Integration Pilot Program Selection Announcement, U.S. Department of Transportation (May 9, 2018), available at https://www.transportation.gov/briefing-room/uas-integration-pilot-program-selection-announcement; Unmanned Aircraft Systems Integration Pilot Program (UASIPP), Federal Aviation Administration (Dec. 1, 2017), available at https://faaco.faa.gov/index.cfm/announcement/view/28745.
[48]   McNabb, supra note 42.
[49]   Marco Margaritoff, Here Are the States Joining Trump’s Drone Integration Pilot Program, TheDrive (May 10, 2018), available at http://www.thedrive.com/tech/20750/here-are-the-states-joining-trumps-drone-integration-pilot-program.
[50]   Leonard, supra note 42; Patrick C. Miller, U.S. DOT Selects 10 Projects for UAS Integration Program, UAS Magazine (May 16, 2018), available at http://uasmagazine.com/articles/1859/u-s-dot-selects-10-projects-for-uas-integration-program.
[51]   Integration Pilot Program Awardees, U.S. Department of Transportation (Sept. 25, 2018), available at https://www.faa.gov/uas/programs_partnerships/uas_integration_pilot_program/awardees/; McNabb, supra note 42 (contains description of each of the ten pilot programs); Miller, supra note 47.
[52]   Keith Shaw, FAA Gives Updates on Drone Integration Program, Robotics Business Review (Aug. 31, 2018), available at https://www.roboticsbusinessreview.com/unmanned/faa-gives-updates-on-drone-integration-program-flights/; Marisa Garcia, From Ice Cream To Wild Hogs: FAA Celebrates Successful Drone Trials, Forbes (Aug. 31, 2018), available at https://www.forbes.com/sites/marisagarcia/2018/08/31/from-ice-cream-to-wild-hogs-faa-celebrates-successful-drone-trials/#708645aa6517; see also ND DOT, UAS Partners Complete Test For Flights Over People, UAS Magazine (Aug. 20, 2018), available at http://www.uasmagazine.com/articles/1903/nd-dot-uas-partners-complete-test-for-flights-over-people.
[53]   Federal Aviation Administration, UAS Data Exchange (LAANC) (undated), available at https://www.faa.gov/uas/programs_partnerships/data_exchange/.
[54]   Id.
[55]   Federal Aviation Administration, FAA Approves Nine New LAANC Service Providers (Oct. 1, 2018), available at https://www.faa.gov/news/updates/?newsId=91744.
[56]   Id.
[57]   Id.
[58]   Linda Chiem, DOT Proposal Would Loosen Rules On Some Drone Flights, Law360 (Jan. 14, 2019), available at https://www.law360.com/articles/1118477; Linda Chiem, Autonomous Car, Drone Cos. Navigate New Compliance Risks, Law360 (Jan. 29, 2019), available at https://www.law360.com/transportation/articles/1110342/autonomous-car-drone-cos-navigate-new-compliance-risks?nl_pk=b316a0e5-d830-42d6-ae05-2ff4e3f4b647&utm_source=newsletter&utm_medium=email&utm_campaign=transportation.
[59]   FOT UAS Initiatives, Federal Aviation Administration (Jan. 14, 2019), available at https://www.faa.gov/uas/programs_partnerships/DOT_initiatives/.
[61]   Andrew Glass, President Reagan calls for launching ‘Star Wars’ initiative, March 23, 1983, Politico (Mar. 23, 2017), available at https://www.politico.com/story/2017/03/president-reagan-calls-for-launching-star-wars-initiative-march-23-1983-236259.
[62]   Id.
[63]   Id.
[64]   Marcus Weisgerber, What Trump’s Space Force Announcement Means, Defense One (June 18, 2018), available at https://www.defenseone.com/politics/2018/06/what-trumps-space-force-announcement-means/149093/.
[65]   Stephanie D. Wilson, Trump’s Space Force vs. Reagan’s Star Wars: Here’s How They Compare, Heavy (June 18, 2018), available at https://heavy.com/news/2018/06/trump-space-force-reagan-star-wars/.
[66]   Marina Koren, Trump’s Space Force Will Have to Wait, Defense One (July 24, 2018), available at https://www.defenseone.com/ideas/2018/07/trumps-space-force-will-have-wait/150011/.
[67]   Id.
[68]   Valerie Insinna, et al., Pentagon Lays Groundwork for Space Force to Blast Off in 2020, Defense News (Aug. 9, 2018), available at https://www.defensenews.com/space/2018/08/09/space-force-will-be-6th-military-branch-by-2020-vice-president-pence-announces/.
[69]   Id.
[70]   Id.
[71]   Id.
[72]   Id.
[73]   Marcus Weisgerber, Pentagon To Start Creating Space Force – Even Before Congress Approves It, Defense One (July 31, 2018), available at https://www.defenseone.com/politics/2018/07/pentagon-create-space-force/150157/.
[74]   Supra, note 63.
[75]   Marcus Weisgerber, White House Seeks Alternatives to Independent Space Force, Defense One (Nov. 28, 2018), available at https://www.defenseone.com/politics/2018/11/white-house-seeks-alternatives-independent-space-force/153119/.
[76]   Id.
[77]   Memorandum from President Donald J. Trump for the Secretary of Defense, Dec. 18, 2018, available at https://www.whitehouse.gov/briefings-statements/text-memorandum-president-secretary-defense-regarding-establishment-united-states-space-command/.
[78]   Id.
[79]   Valerie Insinna, Trump’s new Space Force to reside under Department of the Air Force, Defense News (Dec. 20, 2018), available at https://www.defensenews.com/space/2018/12/20/trumps-new-space-force-to-reside-under-department-of-the-air-force/.
[80]   Id.
[81]   Id.
[82]   Ben Wolfgang, Why Pentagon planners aim to make Trump’s Space Force ‘as small as possible’, The Washington Times (Jan. 30, 2019), available at https://www.washingtontimes.com/news/2019/jan/30/pentagon-aims-make-space-force-small-possible/.
[83]   Reusability:  The Key to Making Human Life Multi-Planetary, SpaceX (June 10, 2015), available at https://www.spacex.com/news/2013/03/31/reusability-key-making-human-life-multi-planetary.
[84]   Eric Ralph, SpaceX to fly reused rockets on half of all 2018 launches as competition lags far behind, Teslarati (Mar. 14, 2018), available at https://www.teslarati.com/spacex-use-reused-rockets-50-percent-all-2018-launches/.
[85]   Id.
[86]   Mike Wall, Elon Musk Says SpaceX Will Reuse A Rocket Within 24 Hours in 2019, Space.com (May 15, 2018), available at https://www.space.com/40581-spacex-reusable-rocket-goal-elon-musk.html.
[87]   Mike Wall, SpaceX Aces First-Ever Rocket Landing in California After Spectacular Satellite Launch, Space.com (Oct. 7, 2018), available at https://www.space.com/42056-spacex-aces-1st-california-rocket-landing-saocom-1a-launch.html.
[88]   Id.
[89]   William Graham, SpaceX Falcon 9 launches SSO-A multi-sat mission, Nasaspaceflight.com (Dec. 3, 2018), available at https://www.nasaspaceflight.com/2018/12/spacex-falcon-9-sso-multi-sat-launch/.
[90]   Marcia Smith, SpaceX To Announce First Private Passenger to Moon on BFR, Space Policy Online (Sept. 13, 2018), available at https://spacepolicyonline.com/news/spacex-to-announce-first-private-passenger-to-moon-on-bfr/.
[91]   Mike Wall, SpaceX Will Fly a Japanese Billionaire (and Artists, Too!) Around the Moon in 2023 (Sept. 17, 2018), available at https://www.space.com/41854-spacex-unveils-1st-private-moon-flight-passenger.html.
[92]   New Space Law to Revolutionize Yet Unexplored Sector, Saudi Gazette (Oct. 9, 2018), available at http://saudigazette.com.sa/article/545224/BUSINESS/New-UAE-space-law-to-revolutionize-yet-unexplored-sector; Noni Edwards, Beyond the Skies, Gulf News (Dec. 4, 2018), available at https://gulfnews.com/uae/science/beyond-the-skies-1.1543922736432.
[93]   UAE Space Agency And NASA Sign Implementing Agreement For Joint Space Exploration, SpaceWatch Middle East (Oct. 2018), available at https://spacewatch.global/2018/10/uae-space-agency-and-nasa-sign-implementing-agreement-for-joint-space-exploration/.
[94]   NASA, UAE Sign Significant Outer Space, Aeronautics Cooperation Agreement, NASA Press Release (June 12, 2016), available at https://www.nasa.gov/press-release/nasa-uae-sign-significant-outer-space-aeronautics-cooperation-agreement.
[95]   Sarwat Nasir, UAE Space Missions Moving Rapidly, says NASA expert, Khaleej Times Dubai, (July 11, 2018), available at https://www.khaleejtimes.com/nation/dubai/uae-space-missions-moving-rapidly-says-nasa-expert.
[96]   UAE Space Agency Says it Won't Break its Roscosmos Contract Despite Soyuz Crash, Sputnik News (Nov. 16, 2018), available at https://sputniknews.com/world/201811161069860111-uae-russia-roscosmos/.
[97]   Philip Yiannopoulos, Inside the epic debate on rethinking our 50-year-old Outer Space Treaty, Fast Company (Sept. 24, 2018), available at https://www.fastcompany.com/90240304/inside-the-epic-debate-on-rethinking-our-50-year-old-outer-space-treaty.
[98]   See further Matthew Wills, Space Is The Place: The US, USSR, and Space Exploration, JSTOR Daily (Sept. 25, 2014), available at https://daily.jstor.org/space-is-the-place/.
[99]   Treaty on Principles Governing the Activities of States in the Exploration and Use of Outer Space, including the Moon and Other Celestial Bodies (Oct. 1967) (“Outer Space Treaty”), UN Office for Outer Space Affairs, available at http://www.unoosa.org/oosa/en/ourwork/spacelaw/treaties/introouterspacetreaty.html.
[100] See, e.g., Fifty years since the first United Nations Conference on the Exploration and Peaceful Uses of Outer Space (1968 - 2018): UNISPACE+50, UNOOSA (June 2018), available at http://www.unoosa.org/oosa/en/ourwork/unispaceplus50/index.html.
[101] Manual on International Law Applicable to Military Uses of Outer Space (MILAMOS Project), McGill University, available at https://www.mcgill.ca/milamos/.
[102] Ann Deslandes, The Bold Future of the Outer Space Treaty, JSTOR Daily (Aug. 1, 2018), available at https://daily.jstor.org/the-bold-future-of-the-outer-space-treaty/.
[103] Peter B. de Selding, EU draft space policy calls for more military involvement, SpaceNews (July 18, 2016) available at https://spacenews.com/eu-draft-space-policy-calls-for-more-military-involvement/
[104] Bryan Bender, Space war is coming – and the U.S. is not ready, Politico (Apr. 6, 2018), available at https://www.politico.com/story/2018/04/06/outer-space-war-defense-russia-china-463067
[105] Zoë Corbyn, The Asteroid Rush Sending 21st-Century Prospectors Into Space, The Guardian (June 9, 2018), available at https://www.theguardian.com/science/2018/jun/09/asteroid-mining-space-prospectors-precious-resources-fuelling-future-among-stars
[106] Supra note 7, Outer Space Treaty, Article IX (Parties to the treaty shall “avoid [. . .] harmful contamination” of outer space and celestial bodies.).
[107] Dr. Laura Grego, 50 years after the Outer Space Treaty: How secure is space?, Space Security Index 2017, 14th ed., 140, available at https://www.ucsusa.org/sites/default/files/attach/2017/12/50-Years-OST-article.pdf.
[108] Michael Baumann, Who Gets to Own Outer Space?, The Ringer (Dec. 27, 2017), available at https://www.theringer.com/2017/12/27/16812048/future-of-space-x-nasa-elon-musk-donald-trump.
[109] Loren Grush, Why Defining The Boundary of Space May Be Crucial For the Future of Spaceflight, The Verge (Dec. 13, 2018), available at https://www.theverge.com/2018/12/13/18130973/space-karman-line-definition-boundary-atmosphere-astronauts.
[110] The White House, Office of the Press Secretary, Presidential Memorandum:  Space Policy Directive-2, Streamlining Regulations on Commercial Use of Space (May 24, 2018), available at: https://www.whitehouse.gov/presidential-actions/space-policy-directive-2-streamlining-regulations-commercial-use-space/.
[111] Haley Byrd, Trump Orders Overhaul of Commercial Space Licensing, Weekly Standard (May 25, 2018), available at https://www.weeklystandard.com/haley-byrd/trump-orders-overhaul-of-commercial-space-licensing.
[112] The White House, Office of the Press Secretary, Statements & Releases: Moon, Mars, and Worlds Beyond: Winning the Next Frontier (Feb. 21, 2018), available at https://www.whitehouse.gov/briefings-statements/moon-mars-worlds-beyond-winning-next-frontier/.
[113] H.R. Rep. No. 2809 (2018), available at https://www.congress.gov/bill/115th-congress/house-bill/2809.
[114] Haley Byrd, House Takes Up Space Commerce Legislation, Weekly Standard (Apr. 24, 2018), available at https://www.weeklystandard.com/haley-byrd/house-takes-up-space-commerce-legislation.
[115] Jeff Foust, Commerce Department to Create “SPACE” Administration, Space News (May 27, 2018), available at https://spacenews.com/commerce-department-to-create-space-administration/.
[116] Jeff Foust, NOAA Speeds Up Remote Sensing License Reviews Amid Broader Regulatory Changes, Space News (Apr. 5, 2018), available at https://spacenews.com/noaa-speeds-up-remote-sensing-license-reviews-amid-broader-regulatory-changes/.
[117] Jeff Foust, Revised Remote Sensing Regulatory Rule Nears Release, Space News (Oct. 26, 2018), available at https://spacenews.com/revised-remote-sensing-regulatory-rule-nears-release/.
[118] Jeff Foust, NOAA Explains Restriction on SpaceX Launch Webcast, Space News (Apr. 3, 2018), available at https://spacenews.com/noaa-explains-restriction-on-spacex-launch-webcast/.
[119] Jeff Foust, Commerce Department Moves Ahead with Space Regulatory Reforms, Space News (June 22, 2018), available at https://spacenews.com/commerce-department-moves-ahead-with-space-regulatory-reforms/.
[120] Jeff Foust, New Office of Space Commerce Director to Focus on Advocacy and Regulatory Issues, Space News (Aug. 23, 2018), available at https://spacenews.com/new-office-of-space-commerce-director-to-focus-on-advocacy-and-regulatory-issues/.
[121] FAAA, supra note 119.
[122] Id.
[123] Id.
[124] Id.
[125] CFIUS operates pursuant to section 721 of the Defense Production Act of 1950, as amended by the Foreign Investment and National Security Act of 2007 (“FINSA”) (section 721) and as implemented by Executive Order 11858, as amended, and regulations at 31 C.F.R. Part 800.
[126] NDAA, § 1703(a)(6)(A).
[127] The select agents and toxins are detailed under several sections of the Code of Federal Regulations: 7 C.F.R. Part 331, 9 C.F.R. Part 121, and Title 42 of the C.F.R; id.
[128] Id. § 1703(a)(6)(A)(vi).
[129] Dept. of Treasury, Determination and Temporary Provisions Pertaining to a Pilot Program to Review Certain Transactions Involving Foreign Persons and Critical Technologies, 83 Fed. Reg. 51322 (Oct. 11, 2018).
[130] Michael Brown and Pavneet Singh, China’s Technology Transfer Strategy:  How Chinese Investments in Emerging Technology Enable a Strategic Competitor to Access the Crown Jewels of U.S. Innovation, Defense Innovation Unit Experimental (January 2018).
[131] Id.; B. Parrett and M. Bruno, Changing the Rules, Aviation Week, Vol. 180, No. 21, at 52-54 (Sept. 2018); Office of the U.S. Trade Representative, Findings of the Investigation into China’s Acts, Policies, and Practices Related to Technology Transfer, Intellectual Property, and Innovation Under Section 301 of the Trade Act of 1974 (Mar. 22, 2018).
[132] Green field investments are a kind of foreign investment in which a foreign parent builds new operations in another country from the ground up.
[133] Review of Controls for Certain Emerging Technologies, 83 Fed. Reg. 58,201 (advance notice of proposed rulemaking Nov. 19, 2018), available at https://www.gpo.gov/fdsys/pkg/FR-2018-11-19/pdf/2018-25221.pdf (hereinafter, “ANPRM”).
[134] ANPRM, supra note 9 at 58,201.
[135] Id.
[136] ECRA § 1758(a)(3)(C).
[137]   Export Administration Act of 1979, §§ 3(2)(A) and 5(d).
[138]   ECRA, §§ 1756(d)(1) and (2).
[139]   ECRA, § 1756(d)(3)(A)-(C).

Gibson Dunn lawyers are available to assist in addressing any questions you may have regarding the issues discussed above. Please contact the Gibson Dunn lawyer with whom you usually work, any of the following in the Aerospace and Related Technologies practice group:

Washington, D.C. Karen L. Manos (+1 202-955-8536, kmanos@gibsondunn.com) Lindsay M. Paulin (+1 202-887-3701, lpaulin@gibsondunn.com) Christopher T. Timura (+1 202-887-3690, ctimura@gibsondunn.com) Los Angeles David A. Battaglia (+1 213-229-7380, dbattaglia@gibsondunn.com) Perlette M. Jura (+1 213-229-7121, pjura@gibsondunn.com) William J. Peters (+1 213-229-7515, wpeters@gibsondunn.com) Dhananjay S. Manthripragada (+1 213-229-7366, dmanthripragada@gibsondunn.com) Lauren M. Fischer (+1 213-229-7983, ) Orange County Casper J. Yen (+1 949-451-4105, cyen@gibsondunn.com) Brett Long (+1 949-451-4032, blong@gibsondunn.com) Arturo Pena Miranda (+1 949-451-4081, apenamiranda@gibsondunn.com) Denver Jared Greenberg (+1 303-298-5707, jgreenberg@gibsondunn.com) Jacob Rierson (+1 303-298-5963, jrierson@gibsondunn.com) New York David M. Wilf (+1 212-351-4027, dwilf@gibsondunn.com) San Francisco Matthew Reagan (+1 415-393-8314, mreagan@gibsondunn.com) Andrea Hadjiyianni (+1 415-393-8386, ahadjiyianni@gibsondunn.com) London Mitri J. Najjar (+44 (0)20 7071 4262, mnajjar@gibsondunn.com) Paris Ahmed Baladi (+33 (0)1 56 43 13 00, abaladi@gibsondunn.com)
© 2019 Gibson, Dunn & Crutcher LLP Attorney Advertising:  The enclosed materials have been prepared for general informational purposes only and are not intended as legal advice.

November 21, 2018 |
New Export Controls on Emerging Technologies – 30-Day Public Comment Period Begins

Click for PDF On Monday, the Trump administration took the first step toward imposing new controls on the export of cutting-edge technologies.  Pursuant to the Export Control Reform Act of 2018 ("ECRA"), the U.S. Department of Commerce's Bureau of Industry and Security ("BIS") published a request for the public's assistance in identifying "emerging technologies" essential for U.S. national security that should be subject to new export restrictions.[1]  The advance notice of proposed rulemaking ("ANPRM") reiterates the general criteria for emerging technologies, provides a representative list of targeted technologies, and provides a 30-day period for comment on which technologies should be subject to these new controls. In response to this notice, companies that operate in certain high technology sectors, such as biotechnology, artificial intelligence, computer processing, and advanced materials, should consider filing public comments and prepare for pending controls.  These companies should start by identifying technologies they possess that are likely to be targeted for new export controls and gather important evidence on the efficacy of potential controls on these technologies.  Companies likely to be affected should  also consider the impact that tighter controls on the transfer of these technologies may have on their business operations.  Additionally, U.S. businesses that engage with emerging technologies must be mindful of new CFIUS regulations that require such businesses to declare certain controlling and non-controlling foreign investments to CFIUS before the investment is made.

BACKGROUND

On August 13, 2018, President Trump signed the John S. McCain National Defense Authorization Act for Fiscal Year 2019 ("FY 2019 NDAA"), an omnibus bill to authorize defense spending that includes—among other measures—the Export Control Reform Act of 2018 ("ECRA").[2]  In addition to placing the U.S. export control regime on firm statutory footing for the first time in decades, ECRA significantly expanded the President's authority to regulate and enforce export controls by requiring the Secretary of Commerce to establish controls on the export, re-export, or in-country transfer of "emerging or foundational technologies."[3] ECRA was passed alongside the Foreign Investment Risk Review Modernization Act ("FIRRMA"), which reformed the CFIUS review process for inbound foreign investment.[4]  As originally drafted, FIRRMA would have included outbound investments—such as joint ventures or licensing agreements—in the list of covered transactions subject to CFIUS review to limit the outflow of technology important to U.S. national security.  This proposed provision was very controversial and was ultimately removed from the bill.  Instead, the final version of the NDAA included ECRA, which granted BIS the authority to work with the interagency group to identify and regulate the transfer of these emerging and foundational technologies.[5]

WHAT ARE EMERGING TECHNOLOGIES?

ECRA does not offer a precise definition of the "emerging technologies" to be controlled by BIS.  Instead, it offers criteria for BIS to consider when determining what technologies will fall within this area of BIS control.  Importantly, the definition of "technology" itself in the context of export controls is well established.  Such technology does not, for example, include end-items, commodities, or software.  Instead, technology is the information, in tangible or intangible form, necessary for the development, production, or use of such goods or software.[6]  Technology may include written or oral communications, blueprints, schematics, photographs, formulae, models, or information gained through mere visual inspection.[7]  For example, speech recognition software would not be a technology and therefore would not be subject to these new controls.  However, the source code for such software would be technology that could be considered "emerging," depending on the criteria BIS applies. The ANPRM broadly describes emerging technologies as "those technologies essential to the national security of the United States that are not already subject to export controls under the Export Administration Regulations ("EAR") or the International Traffic in Arms Regulations ("ITAR")."[8]  The ANPRM suggests that technologies will be considered "essential to the national security of the United States" if they "have potential conventional weapons, intelligence collection, weapons of mass destruction, or terrorist applications or could provide the United States with a qualitative military or intelligence advantage."[9] In narrowing down which of these technologies will be subject to new export controls, BIS will also consider the development of emerging technologies abroad, the effect of unilateral export restrictions on U.S. technological development, and the ability of export controls to limit the spread of these emerging technologies in foreign countries.  In making this assessment and further narrowing the category of affected technologies, BIS will consider information from a variety of interagency sources, as well as public information drawn from comments submitted in response to the ANPRM. Although the ANPRM does not provide concrete examples of "emerging technologies," BIS does provide a list of technologies currently subject to limited controls that could be considered "emerging" and subject to new, broader controls.  These include the following: (1) Biotechnology, such as:
(i)  nanobiology; (ii) synthetic biology; (iii) genomic and genetic engineering; or (iv) neurotech.
(2) Artificial intelligence (AI) and machine learning technology, such as:
(i) neural networks and deep learning (e.g., brain modelling, time series prediction, classification); (ii) evolution and genetic computation (e.g., genetic algorithms, genetic programming); (iii) reinforcement learning; (iv) computer vision (e.g., object recognition, image understanding); (v) expert systems (e.g., decision support systems, teaching systems); (vi) speech and audio processing (e.g., speech recognition and production); (vii) natural language processing (e.g., machine translation); (viii) planning (e.g., scheduling, game playing); (ix) audio and video manipulation technologies (e.g., voice cloning, deepfakes); (x) AI cloud technologies; or (xi) AI chipsets.
(3) Position, Navigation, and Timing (PNT) technology. (4) Microprocessor technology, such as:
(i) Systems-on-Chip (SoC); or (ii) Stacked Memory on Chip.
(5) Advanced computing technology, such as:
(i) memory-centric logic.
(6) Data analytics technology, such as:
(i) visualization; (ii) automated analysis algorithms; or (iii) context-aware computing.
(7) Quantum information and sensing technology, such as:
(i) quantum computing; (ii) quantum encryption; or (iii) quantum sensing.
(8) Logistics technology, such as:
(i) mobile electric power; (ii) modeling and simulation; (iii) total asset visibility; or (iv) distribution-based Logistics Systems (DBLS).
(9) Additive manufacturing (e.g., 3D printing). (10) Robotics such as:
(i) micro-drone and micro-robotic systems; (ii) swarming technology; (iii) self-assembling robots; (iv) molecular robotics; (v) robot compliers; or (vi) smart Dust.
(11) Brain-computer interfaces, such as:
(i) neural-controlled interfaces; (ii) mind-machine interfaces; (iii) direct neural interfaces; or (iv) brain-machine interfaces.
(12) Hypersonics, such as:
(i) flight control algorithms; (ii) propulsion technologies; (iii) thermal protection systems; or (iv) specialized materials (for structures, sensors, etc.).
(13) Advanced Materials, such as:
(i) adaptive camouflage; (ii) functional textiles (e.g., advanced fiber and fabric technology); or (iii) biomaterials.
(14) Advanced surveillance technologies, such as faceprint and voiceprint technologies.[10]

BIS REQUEST FOR COMMENT

Along with a review of its mandate to regulate emerging technologies and a sample of several potentially affected industries, BIS specifically requested public comments on the following points:
  • how the administration should define emerging technologies
  • what the criteria should be for determining whether there are specific technologies within these general categories that are important to U.S. national security
  • what sources the administration can refer to in order to identify emerging technologies
  • what other general technology categories might be important to U.S. national security and warrant control
  • information about the status of development of the listed technologies in the United States and other countries
  • information about what impact the specific emerging technology controls would have on U.S. technological leadership, and
  • suggestions for other approaches to identifying emerging technologies warranting controls.[11]
Comments on these issues are due to BIS by December 19, 2018—only thirty days after the publication of the ANPRM. Critically, comments offered pursuant to this notice will be made public, and there is no express procedure for submitting redacted public comments and complete comments for the agency.

HOW TO RESPOND

Companies potentially affected by these new controls should simultaneously begin preparing for public comments and for pending controls.  The first step in this process should be the identification of potentially targeted technologies.  Companies should work with in-house engineers, researchers, and product development personnel—as well as export control experts—to begin identifying technology that may be targeted for control. Technologies currently controlled under the ITAR or broadly restricted by the EAR will not be included in the new category of "emerging technologies."  Given the express limitations provided in ECRA, technologies produced outside of the United States are also unlikely to be targeted by the new controls, as unilateral U.S. export controls would do little to restrict the flow of these technologies.  Once a company identifies such non-controlled technologies predominantly of U.S.-origin, it should evaluate the extent to which it shares or will share this technology with non-U.S. persons and the means by which it makes such transfers. Having identified technology likely to be impacted by the new controls, companies should prepare public comments in response to the request posed in the ANPRM.  For example, companies may wish to suggest a definition for emerging technologies, or a limiting principle for a potential definition, that is based on an evaluation of potentially affected technologies, market concerns, and BIS's policy objectives.  Concrete evidence of foreign production of comparable technology, the likely impact on U.S. technological superiority of new controls, and the ability of new controls to limit the spread of emerging technologies abroad will also be particularly persuasive.  Where possible, companies may also wish to differentiate their technology from comparable technology that may have conventional weapons, intelligence collection, weapons of mass destruction, or terrorist applications. In addition to providing comments to BIS, companies should also begin preparing to operate under expanded export controls.  Importantly, certain kinds of exports related to emerging technologies will not be subject to new licensing requirements.  For example, the provision of technology associated with the sale or license of finished goods or software will not be subject to a new licensing requirement if the U.S. party to the transaction generally makes the finished items and associated technology available to its customers, distributors, and resellers (e.g., an operation manual exported along with controlled hardware).[12] Similarly, the provision by a U.S. party of technology to a foreign supplier of goods or services to the U.S. party will not be restricted if the foreign supplier has no rights to exploit the technology contributed by the U.S. person other than to supply the procured goods or services.[13]  For example, the provision of blueprints to a foreign manufacturer under these circumstances would not be subject to the new controls.  Additionally, contribution by a U.S. person to an industry organization related to a standard or specification would not generally be subject to the new controls.[14] However, companies should be mindful of the circumstances in which new controls will limit their business operations.  For example, the new controls may limit operations under joint ventures or other cooperative arrangements where emerging technologies are currently exchanged.  In addition, the new controls are likely to limit the availability of certain license exceptions that could be used to facilitate such cooperative arrangements.  Cooperation with individuals and entities in countries subject to U.S. arms embargos, such as China, are likely to be significantly curtailed, as BIS may effectively prohibit exports of emerging technologies to those countries. With these potential impacts in mind, companies should begin evaluating how controls on targeted technologies will affect their operations.

WHAT'S NEXT

BIS will evaluate public comments offered during the 30-day window provided by the ANPRM, along with additional public and classified information collected through the interagency process, to establish the criteria to be used to identify  "emerging technologies" and related export controls.  As a part of this process, it is likely that BIS will rely on some of its existing mechanisms for monitoring and regulating emerging technologies to provide insight into the appropriate scope and content of the new controls. For example, BIS has indicated it will look to its Emerging Technologies and Research Advisory Committee, an advisory body of academics, industry personnel, and researchers that already assist BIS in identifying new technologies and gaps in existing controls.  BIS may also rely on the surveys and network of company partnerships used by its Office of Technology Evaluation to conduct assessments of defense-related technologies.  Other federal agencies engaged in the development of emerging technologies may also contribute to the identification of emerging technologies and appropriate controls, including for example the various advanced research projects agencies (e.g. DARPA, ARPA-E, and IARPA), the National Science Foundation's Foundations of Emerging Technologies, and the national laboratories.  The work of these agencies and entities may suggest areas on which BIS could focus new controls. BIS's current efforts to control emerging technologies and related products may also inform its development of new controls.  In 2012, BIS established a dedicated system for controlling emerging technologies under Export Control Classification Number ("ECCN") 0Y521.  These new controls were similarly intended to restrict the export of items presenting a significant military or intelligence advantage to the United States.  Technology identified under this ECCN requires a license for export to all destinations, except Canada, with limited license exceptions available.  Although only a few items have been identified for control under this existing mechanism (e.g. X-ray deflecting epoxies, biosensor systems, and tools for tritium production), BIS's use of the 0Y521 ECCN series may provide further evidence of the types of technologies BIS may target for control and the restrictions it will apply. As it continues to await public comments and identify emerging technologies, BIS plans to publish a similar ANPRM requesting the public's assistance in identifying and defining "foundational technologies," which will also be subjected to new ECRA-mandated controls.[15]  Once BIS has arrived at a definition for these terms and a set of potential controls, BIS will likely publish a proposed rule providing this information for another period of public comment.  Those comments will undergo a similar process of interagency review, and BIS will announce its final rule providing the new controls on the export of emerging and foundational technologies. Importantly, any technologies that BIS identifies as emerging or foundational through this rulemaking process will be considered "critical technologies" for the purposes of determining CFIUS jurisdiction.[16]  FIRRMA now requires that certain foreign investment in U.S. companies that deal in these critical technologies receive CFIUS review and approval.  Under CFIUS's new program to pilot the implementation of these authorities, CFIUS must receive advance notice of certain types of non-controlling foreign investment in U.S. companies that design, test, manufacture, fabricate, or develop critical technologies—including emerging and foundational technologies identified by BIS—for use in one of several listed industries.[17]  In this regard, BIS's final determination regarding what constitutes "emerging technologies" will also impact the scope of CFIUS's expanded jurisdiction.

   [1]   Review of Controls for Certain Emerging Technologies, 83 Fed. Reg. 58,201 (advance notice of proposed rulemaking Nov. 19, 2018), https://www.gpo.gov/fdsys/pkg/FR-2018-11-19/pdf/2018-25221.pdf [hereinafter, "ANPRM"].
   [2]   Export Control Reform Act of 2018, Pub. L. No. 115-232, §§ 1751-1781 (2018).
   [3]   Id. § 1758.
   [4]   Foreign Investment Risk Review Modernization Act of 2018, Pub. L. No. 115-232, §§ 1701-1728 (2018).
   [5]   Export Control Reform Act of 2018, Pub. L. No. 115-232, § 1758 (2018).
   [6]   15 C.F.R. § 772.1.
   [7]   Id.
   [8]   ANPRM, supra note 1 at 58,201.
   [9]   Id.
[10]   Id. at 58,202.
[11]   Id.
[12]   Export Control Reform Act of 2018, Pub. L. No. 115-232, § 1758(b)(4)(c)(i) (2018).
[13]   Id. § 1758(b)(4)(c)(iv).
[14]   Id. § 1758(b)(4)(c)(v).
[15]   ANPRM, supra note 1 at 58,202.
[16]   Foreign Investment Risk Review Modernization Act of 2018, Pub. L. No. 115-232, § 1703 (2018).
[17]   31 C.F.R. § 801.101.

The following Gibson Dunn lawyers assisted in preparing this client update: Judith Alison Lee, Adam M. Smith, R.L. Pratt and Christopher Timura. Gibson Dunn's lawyers are available to assist in addressing any questions you may have regarding the above developments.  Please contact the Gibson Dunn lawyer with whom you usually work, the authors, or any of the following leaders and members of the firm's International Trade practice group: United States: Judith Alison Lee - Co-Chair, International Trade Practice, Washington, D.C. (+1 202-887-3591, jalee@gibsondunn.com) Ronald Kirk - Co-Chair, International Trade Practice, Dallas (+1 214-698-3295, rkirk@gibsondunn.com) Jose W. Fernandez - New York (+1 212-351-2376, jfernandez@gibsondunn.com) Marcellus A. McRae - Los Angeles (+1 213-229-7675, mmcrae@gibsondunn.com) Adam M. Smith - Washington, D.C. (+1 202-887-3547, asmith@gibsondunn.com) Christopher T. Timura - Washington, D.C. (+1 202-887-3690, ctimura@gibsondunn.com) Ben K. Belair - Washington, D.C. (+1 202-887-3743, bbelair@gibsondunn.com) Courtney M. Brown - Washington, D.C. (+1 202-955-8685, cmbrown@gibsondunn.com) Laura R. Cole - Washington, D.C. (+1 202-887-3787, lcole@gibsondunn.com) Stephanie L. Connor - Washington, D.C. (+1 202-955-8586, sconnor@gibsondunn.com) Helen L. Galloway - Los Angeles (+1 213-229-7342, hgalloway@gibsondunn.com) Henry C. Phillips - Washington, D.C. (+1 202-955-8535, hphillips@gibsondunn.com) R.L. Pratt - Washington, D.C. (+1 202-887-3785, rpratt@gibsondunn.com) Scott R. Toussaint - Palo Alto (+1 650-849-5320, stoussaint@gibsondunn.com) Europe: Peter Alexiadis - Brussels (+32 2 554 72 00, palexiadis@gibsondunn.com) Attila Borsos - Brussels (+32 2 554 72 10, aborsos@gibsondunn.com) Patrick Doris - London (+44 (0)207 071 4276, pdoris@gibsondunn.com) Penny Madden - London (+44 (0)20 7071 4226, pmadden@gibsondunn.com) Benno Schwarz - Munich (+49 89 189 33 110, bschwarz@gibsondunn.com) Michael Walther - Munich (+49 89 189 33-180, mwalther@gibsondunn.com) Richard W. Roeder - Munich (+49 89 189 33-160, rroeder@gibsondunn.com)
© 2018 Gibson, Dunn & Crutcher LLP Attorney Advertising:  The enclosed materials have been prepared for general informational purposes only and are not intended as legal advice.

March 16, 2018 |
Aerospace and Related Technologies – Key Developments in 2017 and Early 2018

Click for PDF This March 2018 edition of Gibson Dunn's Aerospace and Related Technologies Update discusses newsworthy developments, trends, and key decisions from 2017 and early 2018 that are of interest to aerospace and defense, satellite, and drone companies; and new market entrants in the commercial space and related technology sectors, including the private equity and other financial institutions that support and enable their growth. Specifically, this update covers the following areas: (1) commercial unmanned aircraft systems ("UAS"), or drones; (2) government contracts litigation involving companies in the aerospace and defense industry; (3) the commercial space sector; and (4) cybersecurity and privacy issues related to the national airspace.  We discuss each of these areas in turn below.

I.    COMMERCIAL UNMANNED AIRCRAFT SYSTEMS

The commercial drone industry has continued to mature through advancements in technology, government relations, and public perception.  Commercial drones are being used for various sensory data collection, building inspections, utility inspections, agriculture monitoring and treatment, railway inspections, pipeline inspections, mapping of mines, and photography.  New drone applications are being created on a regular basis.  For example, the concept of flying drone taxis was validated in Dubai in September 2017 when an uncrewed two-seater drone successfully conducted its first test flight. Around a year and a half ago, United States regulations governing non-recreational drone operations were finalized.  Since then, the Federal Aviation Administration ("FAA") has issued over 60,000 remote pilot certificates.  The FAA has and continues to make efforts to advance its technology, and it recently released a prototype application to provide operators with automatic approval of specific airspace authorizations.  The national beta test of this system will launch in 2018, and we will be sure to report back with the results. One of the biggest boons for the industry over the past 15 months was the positive public perception stemming from Hurricane Harvey relief efforts.  In the days following the disaster, drones worked in concert with government agencies to support search and rescue missions, inspect roads and railroads, and assess water plants, oil refineries, cell towers, and power lines.  Further, major insurance companies used drones to assess claims in a safer, faster, and more efficient manner.  The aftermath of this disaster demonstrated the value of drone technology and increasingly has driven a positive public perception of the industry.  Indeed, even aside from the disaster relief efforts, media sources continue to carry positive drone stories.  For example, in January 2018, Australian lifeguards were testing a drone with the ability to release an inflatable rescue pod; during its testing, the drone was called into action, and rescued two teenagers from drowning. The future is bright, but there are still many obstacles for the industry to overcome before it fully matures, such as clarity around low altitude airspace, privacy concerns, and the risk to people, property, and other aircraft. To get you caught up on 2017 and early 2018 drone developments, we have briefly summarized below: (A) highlights of drone litigation impacting airspace, including highlights from previous years for context; (B) drone registration; (C) privacy issues related to drones; (D) the United States government's expanded use of drones; (E) drone countermeasures; (F) drone safety studies; and (G) the UAS airspace integration pilot program.

A.    Litigation Highlights Regarding Airspace

Huerta v. Haughwout, No. 3:16-cv-358, Dkt. No. 30 (D. Conn. Jul. 18, 2016)
The latter half of 2016 featured an important decision regarding the FAA's authority over low-level airspace.  The 2016 decision, Huerta v. Haughwout—also known as "the flamethrower drone case," involved two YouTube videos posted by the Haughwouts.  One video featured a drone firing an attached handgun, while a second video showed a drone using an attached flamethrower to scorch a turkey.  After the videos were publicly uploaded, the FAA served the Haughwouts with an administrative subpoena to acquire further information about the activities featured in the videos.  The Haughwouts refused to comply with the FAA's subpoenas, asserting that their activities were not subject to investigation by the FAA.  In response, the FAA sought enforcement of the subpoenas in the District of Connecticut.[1] Judge Jeffrey Meyer found the administrative subpoenas to be valid.  Most importantly, however, his order included dicta casting doubt on the FAA's claim to control all airspace from the ground up:  "The FAA believes it has regulatory sovereignty over every inch of outdoor air in the United States…. [T]hat ambition may be difficult to reconcile with the terms of the FAA's statute that refer to 'navigable airspace.'"  While this dicta addressed the question of where the FAA's authority begins, Judge Meyer also noted that "the case does not yet require an answer to that question."[2]  Judge Meyer further stated:
Congress surely understands that state and local authorities are (usually) well positioned to regulate what people do in their own backyards.  The Constitution creates a limited national government in recognition of the traditional police power of state and local government.  No clause in the Constitution vests the federal government with a general police power over all of the air or all objects that leave the ground.  Although the Commerce Clause allows for broad federal authority over interstate and foreign commerce, it is far from clear that Congress intends–or could constitutionally intend–to regulate all that is airborne on one's own property and that poses no plausible threat to or substantial effect on air transport or interstate commerce in general.[3]
2017 featured the resolution of another lawsuit where the plaintiff attempted to extend the significance of Haughwout in an effort to get the courts to address the question of what "navigable airspace" means in the context of drones (see discussion of Singer v. City of Newton, infra).
Boggs v. Merideth, No. 3:16-cv-00006 (W.D. Ky. Jan. 4, 2016)
In Boggs v. Merideth—better known as "the Drone Slayer case"—a landowner shot down an operator's drone with a shotgun in the Western District of Kentucky.[4]  The plaintiff flew his drone roughly 200 feet above the defendant's property, causing the defendant—the self-anointed "Drone Slayer"—to claim the drone was trespassing and invading his privacy and shoot it down.  The plaintiff believed the airspace 200 feet above the ground was federal airspace and therefore the defendant could not claim the drone was trespassing. Following a state judge's finding that the defendant acted "within his rights," the drone operator filed a complaint in federal court for declaratory judgment to "define clearly the rights of aircraft operators and property owners."[5]  The case had the potential to be a key decision on the scope of federal authority over the use of airspace.  Rather than claiming defense of property, however, the defendant moved to dismiss the complaint on jurisdictional grounds.  The plaintiff unsuccessfully attempted to rely on the decision in Huerta v. Haughwout for the proposition that all cases involving the regulation of drone flight should be resolved by federal courts.  The court rejected the plaintiff's argument, noting that Haughwout only concerned the FAA's ability to exercise subpoena power and enforce subpoenas in federal court.  In fact, the district court noted, the court in Haughwout "expressed serious skepticism as to whether all unmanned aircrafts are subject to FAA regulation."[6]  In his March 2017 order, Senior District Court Judge Thomas B. Russell granted the defendant's motion to dismiss for lack of federal jurisdiction, stating that the issue of whether or not the drone was in protected airspace only arises on the presumption that the defendant would raise the defense that he was defending his property.[7]  Consequently, there was no federal question jurisdiction and the case was thrown out without ever reaching its merits. While the answer to what exactly constitutes "navigable airspace" in the drone context remained unanswered in 2017, the year did mark the beginning of federal courts addressing the overlap between conflicting state, local, and federal drone laws.
Singer v. City of Newton No. 1:17-cv-10071 (D. Mass. Jan. 17, 2017)
On September 21, 2017, a federal judge in the District of Massachusetts held that portions of the City of Newton, Massachusetts's ("Newton") ordinance attempting to regulate unmanned aircraft operations within the city were invalid.[8] The case, Singer v. City of Newton, marks the first time a federal court has struck down a local ordinance attempting to regulate drones.  The court held the following four city ordinance provisions to be unenforceable: (1) a requirement that all owners register their drones with the city; (2) a ban on all drone operations under 400 feet that are over private property unless done with express permission of the property owner; (3) a ban on all drone operations over public property, regardless of altitude, unless done with the express permission of the city; and (4) a requirement that no drone be operated beyond the visual line of sight of its operator.[9] All four of these provisions of the Newton ordinance were found to be preempted by federal regulations promulgated by the FAA. In the course of holding that the four sections of Newton's ordinance were each preempted, the court identified the congressional objectives each section inhibited.  One relevant congressional objective is to make the FAA the exclusive regulatory authority for registration of drones.  The Newton ordinance required the registration of drones with the City of Newton, which impeded Congress's objective; thus, the court found that section to be preempted.[10] The court also identified a congressional objective for the FAA to develop a comprehensive plan to safely accelerate the integration of drones into the national airspace system.  The two sections of the Newton ordinance requiring prior permission to fly above both public and private property within the city effectively eliminated any drone activity without prior permission; thus those sections were held to interfere with the federal objective and were invalidated.[11] Lastly, the court found that the Newton ordinance's provision barring drone usage beyond the visual line of sight of the operator conflicted with a less restrictive FAA rule allowing such usage if a waiver is obtained or if a separate visual observer can see the drone throughout its flight and assist the operator.[12] The Singer ruling marked the long-anticipated beginning of federal courts addressing overlapping state, local, and federal drone laws.  While the ruling is significant for invalidating sections of a local ordinance and thus establishing a framework that federal courts may follow to invalidate state and local drone laws elsewhere, it is important not to overstate the case's current significance.  The court in Singer declined to hold that law relating to airspace was expressly preempted or field preempted, but rather decided it was conflict preempted.  Consequently, the case does not provide support for the assertion that all state and local drone laws related to airspace will be preempted by FAA regulations.  Further, the court did not opine on the lower limits of the National Airspace and whether it goes to the ground, an issue likely to come up in future litigation. The unchallenged portions of the Newton ordinance still stand, and the closing lines in the opinion recognize that Newton is free to redraft the invalidated portions to avoid direct conflict with FAA regulations.  Thus it remains possible, even in the District of Massachusetts, for federal law to coexist with state and local laws in this field.  In order to successfully avoid invalidation in the courts, however, state and local lawmakers must draft legislation that allows for compliance with federal regulations, and which does not interfere with any federal objectives. The year 2017 left much to still be determined by the courts.  While Newton demonstrated that preemption concerns do and will continue to exist, the case did not address the boundary of the National Airspace.  Haughwout did address the boundary—though only through dicta—and suggested that, when the issue is decided, the boundary will likely not extend to the ground.  Thus, as was the case at the start of 2017, where the boundary will be drawn remains to be seen.

B.    Drone Registration: From Mandatory to Optional and Back to Mandatory

In December 2015, days before tens of thousands of drones were gifted for the holidays, the FAA adopted rules requiring the registration of drones weighing more than 0.55 pounds prior to operation.  This registration requirement only impacted recreational users, as commercial users are required to register under Part 107.  This rule was challenged in Taylor v. Huerta, and on May 19, 2017, the U.S. Court of Appeals for the D.C. Circuit vacated the rule.[13]  The FAA instituted a program to issue refunds, and recreational pilots enjoyed the freedom of flying unregistered drones for the next seven months. The Circuit Court struck down the rule because the FAA lacked statutory authority to issue such a rule for recreational pilots.  Section 336 of the FAA Modernization and Reform Act of 2012 states that the "Administrator of the Federal Aviation Administration may not promulgate any rule or regulation regarding a model aircraft."[14]  The Court held that the FAA's registration rule "directly violates that clear statutory prohibition" and vacated the rule to the extent it applied to model aircraft.[15]  The FAA responded by offering $5 registration fee refunds and the option to have one's information removed from the federal database, but encouraging recreational operators to voluntarily register their drones. However, in a turn of events, on December 12, 2017, the President signed the National Defense Authorization Act of 2018, which included a provision reinstating the rule:
Restoration Of Rules For Registration And Marking Of Unmanned Aircraft.—The rules adopted by the Administrator of the Federal Aviation Administration in the matter of registration and marking requirements for small unmanned aircraft (FAA-2015-7396; published on December 16, 2015) that were vacated by the United States Court of Appeals for the District of Columbia Circuit in Taylor v. Huerta (No. 15-1495; decided on May 19, 2017) shall be restored to effect on the date of enactment of this Act.[16]
As a result of the Act, both recreational and commercial pilots are now required to register their drones, and one can do so on the FAA's website.

C.    UAS and Privacy

1.    Voluntary Best Practices Remain Intact

A 2015 Presidential Memorandum issued by then President Obama ordered the National Telecommunications and Information Administration ("NTIA") of the U.S. Department of Commerce to create a private-sector engagement process to help develop voluntary best practices for privacy and transparency issues regarding commercial and private drone use.[17]  Since Part 107 of Title 14 of the Code of Federal Regulations ("Part 107")[18] does not address privacy, privacy advocates hoped that the NTIA would force the FAA to promulgate privacy regulations.[19]  Prior attempts to petition the FAA to consider privacy concerns in its Notice of Proposed Rulemaking ("NPRM") for Part 107 were unsuccessful.[20] The NTIA issued its voluntary best privacy practices for drones on May 19, 2016.[21]  While the final best practices found support from some privacy organizations and most of the commercial drone industry, other privacy groups raised concerns that the best practices neither established nor encouraged binding legal standards.[22]  Nonetheless, the best practices offer useful guidelines for companies testing and/or actively conducting drone operations.

2.    Litigation Regarding the FAA's Role in Addressing Privacy

As we discussed in an earlier update, the Electronic Privacy Information Center ("EPIC") challenged the FAA's decision to exclude privacy regulations from Part 107 in an August 2016 petition for review.[23]  In 2012, EPIC petitioned the FAA to promulgate privacy regulations applicable to drone use, which the FAA denied in February 2014.[24]  EPIC argued that the FAA Modernization and Reform Act of 2012 required the FAA to consider privacy issues in its NPRM.[25]  The FAA argued that while the Act directed the FAA to develop a comprehensive plan to safely integrate drones into the national airspace system, privacy considerations went "beyond the scope" of that plan.[26]  The D.C. Circuit dismissed EPIC's petition for review on two grounds.[27]  First, the Court deemed EPIC's petition for review "time-barred" because EPIC filed 65 days past the time allotted under 49 U.S.C. § 46110(a).[28]  Second, the Court held that the FAA's "conclusion that privacy is beyond the scope of the NPRM" was not a final agency determination subject to judicial review.[29] After the rule became final, EPIC filed a new petition for review asking the court to vacate Part 107 and remand it to the FAA for further proceedings.[30]  Consolidated with a related case, Taylor v. FAA, No. 16-1302 (D.C. Cir. filed August 29, 2016), EPIC argues that the FAA violated the Act by: (1) refusing to consider "privacy hazards," and (2) refusing to "conduct comprehensive drone rulemaking," which necessarily includes issues related to privacy.[31]  The FAA argues: (1) EPIC lacks standing, (2) the FAA reasonably decided not to address privacy concerns, and (3) even if EPIC has standing, Section 333 of the Act does not require the FAA to promulgate privacy regulations.[32]  Judge Merrick Garland, Judge David Sentelle, and Judge A. Raymond Randolph heard oral arguments in the consolidated cases on January 25, 2018.[33]  All eyes thus remain on the D.C. Circuit to determine whether the FAA must issue regulations covering privacy concerns raised by increased drone use.

D.    The United States Government Expands Its Use of Drones

Four years after the U.S. Department of Defense ("DoD") issued its 25-year "vision and strategy for the continued development, production, test, training, operation, and sustainment of unmanned [aircraft] systems technology,"[34] the drone defense industry continues to experience rapid growth.  A recent market report estimated that commercial and government drone sales will surpass $12 billion by 2021.[35]  However, that estimate is likely conservative when considering that the DoD allocated almost $5.7 billion to drone acquisition and research in 2017 alone.[36]  Likewise, the DoD allocates almost $7 billion to drone technology in its 2018 fiscal year Defense Budget.[37]  Additionally, Goldman Sachs forecasted a $70 billion market opportunity for military drones by 2020.[38]  According to Goldman Sachs: "Current drone technology has already surpassed manned aircraft in endurance, range, safety and cost efficiency — but research and development is far from over.  The next generation of drones will widen the gap between manned and unmanned flight even further, adding greater stealth, sensory, payload, range, autonomous, and communications capabilities."[39]  It should thus come as no surprise that organizations developing defense-specific drones will expect increased demand for complete systems and parts in the coming years.

1.    United States Government's Domestic Use Drones

The U.S. government mostly acquires drones for overseas military operations, a trend dating back to the deployment of the Predator drone in post-9/11 conflict territories.[40]  Domestic use of DoD-owned drones remains subject to strict governmental approval, and armed drones are prohibited on U.S. soil.[41]  In February 2015, the Deputy Secretary of Defense issued Policy Memorandum 15-002 entitled "Guidance for the Domestic Use of Unmanned Aircraft Systems."[42]  Under the policy, the Secretary of Defense must approve all domestic use of DoD-owned UAVs, with one exception—domestic search and rescue missions overseen by the Air Force Rescue Coordination Center.[43]  However, DoD personnel may use drones to surveil U.S. persons where permitted by law and where approved by the Secretary.[44]  The policy expired on February 17, 2018,[45] and it remains to be seen how the Trump administration will handle domestic use of DoD-owned drones and the integration of UAVs into day-to-day civilian operations.

E.    Drone Countermeasures

In response to the rapid growth of militarized consumer drones, particularly in ISIS-controlled territories,[48] 2017 saw an increased offering of anti-drone technologies in the U.S.[49]  In April 2017, the U.S. Army's Rapid Equipment Force purchased 50 of Radio Hill Technologies' "Dronebuster" radar guns.[50]  The Dronebuster uses radio frequency technology to interrupt the control of drones by effectively jamming the control frequency or the GPS signal.[51]  The end-user can overwhelm the drone and deprive its operator of control or cause the drone to "fall out of the sky."[52]  Handheld radar-type guns like the Dronebuster weigh about five pounds and cost an average of $30,000.[53]  The U.S. military also experimented with the Mobile High-Energy Laser-equipped Stryker vehicle.[54]  Similar to the Dronebuster, the 5 to 10kW laser overwhelms target drones' control systems with high bursts of energy.[55]  It can shoot down drones 600 meters away, all without making a sound.[56]

F.    Drone Safety Studies

Making UAS operations commonplace in urban airspace will be a big step in the technological and economic advancement of the U.S.; however, there are obstacles to overcome in ensuring the safe operation of drones in urban areas.  On April 28, 2017, the Alliance for System Safety of UAS through Research Excellence ("ASSURE") released the results of a study that explored the severity of a UAS collision with people and property on the ground.[57]  First, ASSURE determined the most likely impact scenarios by reviewing various operating environments for UAS and determining their likely exposure to people and other manned aircraft.[58]  Then the team conducted crash tests and analyzed crash dynamics by measuring kinetic energy transfer.[59]  The results revealed that earlier measurements of the danger of collision grossly overestimate the risk of injury from a drone.[60]  ASSURE concluded that the DJI Phantom 3 drone has a 0.03% chance of causing a head injury if it falls on a person's head.[61]  This is a very low probability considering blocks of steel or wood of the same weight have a 99% risk of causing a head injury in the same scenario.[62]  The disparity in probability of head injury is largely due to the fact that the DJI Phantom 3 drone absorbs most of the energy resulting from a collision, and therefore less energy is transferred on impact from the drone than from a block of steel or wood in the same collision.[63]

Comparison of Steel and Wood with Phantom 3

In fact there are numerous steps that drone designers and manufacturers can take to reduce the likelihood of injury in the event of a collision.[64]  Projectile mass and velocity, as well as stiffness of the UAS, are the primary drivers of impact damage.[65]  As such, multi-rotor drones tend to be safer because they fall more slowly due to the drag of the rotors as the drones fall through the air.[66]  The study made clear that blade guards should be a design requirement for drones used in close proximity to people in order to minimize the lacerations that can result from a collision.[67]  Moreover, ASSURE found that the more flexible the structure of the drone, the more energy the drone retains during impact, causing less harm to the impacted object of the collision.[68] Regarding crashes with other manned aircraft, however, the study revealed that the impact of a drone can be much more severe than the impact of a bird of equivalent size and speed.[69]  As such, the structural components of a commercial aircraft that allows it to withstand bird strikes from birds up to eight pounds are not an appropriate guideline for preventing damage from a UAS strike.[70]  The study also examined the dangers associated with lithium batteries, which are used to power most drones, in collisions.[71]  The major concern is the risk of a battery fire.[72]  The study found that typical high-speed impacts cause complete destruction of the battery, eliminating any concerns about battery fires.[73]  However, the lower impact crashes, which are mainly associated with take-off and landing, left parts of the battery intact, posing a risk of battery fire.[74] While the ASSURE study is the first of its kind, it certainly marks the need for more studies that analyze the practical aspects of collisions and how to reduce risk to minimize harm.  The hazards associated with commonplace drone operation are many.[75]  Analysis of the physical impact of a collision is one aspect of minimizing UAS risks.  There is still much work to be done in order to minimize other collateral risks, such as the risk of technology failures, which range from UAS platform failures, to failures of hardware or communication links controlling the UAS.[76]  Environmental hazards, such as the effect of rain, lightning, and other types of weather remains to be studied.[77]  Ways to safeguard against human error or intentional interference is another aspect of UAS safety that has yet to be studied in detail.[78]  Data link spoofing, jamming, or hijacking poses significant safety hazards, particularly as incidents of data breaches become more and more common.[79]  Before the integration of UAS into national airspace can be fully implemented, industry stakeholders must collaborate to conduct studies that will help inform legislators about what kind of technological requirements and operational regulations are necessary.

G.    UAS Airspace Integration Pilot Program

In October 2017, the U.S. Department of Transportation ("DOT") announced that it was launching the Unmanned Aircraft Systems Integration Pilot Program.[80]  The program, which was established in response to a presidential directive, is meant to accelerate the integration of UAS into the national airspace through the creation of public-private partnerships between UAS operators, governmental entities, and other private stakeholders.[81]  The program is designed to establish greater regulatory certainty and stability regarding drone use.[82]  After reviewing the applications, DOT will select a minimum of five partnerships with the goal of collaborating with the selected industry stakeholder in order to evaluate certain advanced UAS operational concepts, such as night operations, flights beyond the pilot's line of sight, detect-and-avoid technologies, flights over people, counter-UAS security operations, package delivery, the integrity and dependability of data links between pilot and aircraft, and cooperation between local authorities and the FAA in overseeing UAS operations.[83] One such application was made by the City of Palo Alto, in partnership with the Stanford Blood Center, Stanford hospital, and Matternet, a private drone company.[84]  The City of Palo Alto has proposed the use of drones to deliver units of blood from the Stanford Blood Center to Stanford hospital, which would involve establishing an approved flight path for drones to transfer the units of blood in urgent situations.[85]  Matternet has already tested its drones' capacity for transporting blood and other medical samples in Switzerland.[86]  A second project proposed by the City of Palo Alto involves the use of drones in order to monitor the perimeter of the Palo Alto Airport.[87]  This project involves a partnership between the city and a company called Multirotor, a German drone company that has experience working with the German army and the Berlin Police Department to integrate UAS as tools for law enforcement activities.[88] The creation of the pilot program has given stakeholders the sense that the current administration is supportive of integrating drones into the national airspace.  The support of the government has created the potential for unprecedented growth in an industry that could bring lucrative returns to its stakeholders.  The DOT has already received over 2,800 interested party applications.[89]  The majority of these applications have come from commercial drone companies, as well as various other stakeholders including energy companies, law enforcement agencies, and insurance providers.[90]  The UAS Pilot Program is to last for three years.[91]  The projected economic benefit of integrated UAS is estimated to equal $82 billion, creating up to 100,000 jobs.[92]  Industries that could see immediate returns from the program include precision agriculture, infrastructure inspection and monitoring, photography, commerce, and crisis management.[93]  The advent of established, government-sanctioned rules for the operation of UAS will motivate industry stakeholders both in the public and private sectors to push forward with new and innovative ways to use drones.

II.    GOVERNMENT CONTRACTS LITIGATION IN THE AEROSPACE AND DEFENSE INDUSTRY

Gibson Dunn's 2017 Year-End Government Contracts Litigation Update and 2017 Mid-Year Government Contracts Litigation Update cover the waterfront of the most important opinions issued by the U.S. Court of Appeals for the Federal Circuit, U.S. Court of Federal Claims, Armed Services Board of Contract Appeals ("ASBCA"), and Civilian Board of Contract Appeals among other tribunals.  We invite you to review those publications for a full report on case law developments in the government contracts arena. In this update, we (A) summarize key court decisions related to government contracting from 2017 that involve players in the aerospace and defense industry.  The cases discussed herein, and in the Government Contracts Litigation Updates referenced above, address a wide range of issues with which government contractors in the aerospace and defense industry are likely familiar.

A.    Select Decisions Related to Government Contractors in the Aerospace and Defense Industry

Technology Systems, Inc., ASBCA No. 59577 (Jan. 12, 2017)
TSI held four cost-plus-fixed-fee contracts with the Navy for research and development.  Several years into the contracts, the government disallowed expenses that had not been questioned in prior years.  TSI appealed to the ASBCA, arguing that it relied to its detriment on the government's failure to challenge those same expenses in prior years. The Board (Prouty, A.J.) held that the challenged costs were "largely not allowable" and that "the principle of retroactive disallowance," which it deemed "a theory for challenging audits whose heyday has come and gone," did not apply because the same costs had simply not come up in the prior audits.  The theory of retroactive disallowance, first articulated in a Court of Claims case in 1971, prevents the government from challenging costs already incurred when the cost previously had been accepted following final audit of historical costs; the contractor reasonably believed that it would continue to be approved; and it detrimentally relied on the prior acceptance.  Tracing the precedent discussing the principle, the Board cited the Federal Circuit's decision in Rumsfeld v. United Technologies Corp., 315 F.3d 1361 (Fed. Cir. 2003), which stated that "affirmative misconduct" on the part of the government would be required for the principle of retroactive disallowance to apply because it is a form of estoppel against the government.  The Board "sum[med] up: there is no way to read our recent precedent or the Federal Circuit's except to include an affirmative misconduct requirement amongst the elements of retroactive disallowance.  Period."  Further, the Board held that the government's failure to challenge the same costs in prior years did not constitute a "course of conduct precluding the government from disallowing the costs in subsequent audits."
Delfasco LLC, ASBCA No. 59153 (Feb. 14, 2017)
Delfasco had a contract with the Army for the manufacture and delivery of a specified number of munition suspension lugs.  The Army thereafter exercised an option to double the number of lugs required.  When Delfasco stopped making deliveries due to an inability to pay its subcontractor, the Army terminated the contract for default.  Delfasco appealed to the ASBCA, asserting that the government had waived its right to terminate for untimely performance by allegedly stringing Delfasco along even after the notice of termination. The Board (Prouty, A.J.) set out the test for waiver in a case involving termination for default due to late delivery as follows:  "(1) failure to terminate within a reasonable time after the default under circumstances indicating forbearance, and (2) reliance by the contractor on the failure to terminate and continued performance by him under the contract with the Government's knowledge and implied or express consent."  The Board held that Delfasco failed to satisfy the first prong because the government's show cause letter placed Delfasco on notice that any continued performance would only be for the purpose of mitigating damages.  Moreover, Delfasco failed to satisfy the second prong because Delfasco's payment to its subcontractor after the show cause letter would have been owed regardless, and was not paid in reliance upon the government's failure to terminate.  Therefore, the Board found that the government had not waived its right to terminate, and denied the appeal.
Raytheon Co., ASBCA Nos. 57743 et al. (Apr. 17, 2017)
Raytheon appealed from three final decisions determining that an assortment of costs—including those associated with consultants, lobbyists, a corporate development database, and executive aircraft—were expressly unallowable and thus subject to penalties.  After a two-week trial, the Board (Scott, A.J.) sided largely with Raytheon in a wide-ranging decision that covers a number of important cost principles issues. First, the Board rejected the government's argument that the consultant costs were expressly unallowable simply because the government was dissatisfied with the level of written detail of the work product submitted to support the costs.  Judge Scott noted that written work product is not a requirement to support a consultant's services under FAR 31.205-33(f), particularly not where, as here, much of the consultants' work was delivered orally due to the classified nature of the work performed.  The Board found that not only were the consultant costs not expressly unallowable, but indeed were allowable.  This is a significant ruling because the documentation of consultant costs is a recurring issue as government auditors frequently make demands concerning the amount of documentation required to support these costs during audits. Second, the government sought to impose penalties for costs that inadvertently were not withdrawn in accordance with an advance agreement between Raytheon and the government concerning two executive aircraft.  Raytheon agreed that the costs should have been withdrawn and agreed to withdraw them when the error was brought to its attention, but asserted that the costs were not expressly unallowable and subject to penalty.  The Board agreed, holding that the advance agreements did not themselves clearly name and state the costs to be unallowable, and further that advance agreements do not have the ability to create penalties because a cost must be named and stated to be unallowable in a cost principle (not an advance agreement) to be subject to penalties.  This ruling could have significance for future disputes arising out of advance agreements. Third, the government alleged that costs associated with the design and development of a database to support the operations of Raytheon's Corporate Development office were expressly unallowable organizational costs under FAR 31.205-27.  The Board disagreed, validating Raytheon's argument that a significant purpose of the Corporate Development office was allowable generalized long-range management planning under FAR 31.205-12, thus rendering the costs allowable (not expressly unallowable). The only cost for which the Board denied Raytheon's appeals concerned the salary costs of government relations personnel engaged in lobbying activities.  Raytheon presented evidence that it had a robust process for withdrawing these costs as unallowable under FAR 31.205-22, but inadvertently missed certain costs in this instance due to, among other things, "spreadsheet errors."  Raytheon agreed that the costs were unallowable and should be withdrawn, but disputed that the costs of employee compensation (a generally allowable cost) were expressly unallowable and further argued that the contracting officer should have waived penalties under FAR 42.709-5(c) based on expert evidence that Raytheon's control systems for excluding unallowable costs were "best in class."  The Board found that salary costs associated with unallowable lobbying activities are expressly unallowable and that the contracting officer did not abuse his discretion in denying the penalty waiver.
L-3 Comms. Integrated Sys. L.P. v. United States, No. 16-1265C (Fed. Cl. May 31, 2017)
L-3 entered an "undefinitized contractual action" ("UCA") with the Air Force in which it agreed to provide certain training services while still negotiating the terms of the contract.  After the parties failed to reach agreement on the prices for two line items in the UCA, the Air Force issued a unilateral contract modification, setting prices for those line items and definitizing the contract.  L-3 argued that the Air Force's price determination was unreasonable, arbitrary and capricious, and in violation of the FAR, and filed suit seeking damages.  The government moved to dismiss for lack of subject matter jurisdiction. The Court of Federal Claims (Kaplan, J.) dismissed L-3's complaint, concurring with the government that L-3 had never presented a certified claim to the contracting officer for payment "of a sum certain to cover the losses it allegedly suffered."  The court found that the proposals L-3 had presented to the Air Force were not "claims," but rather proposals made during contract negotiations that did not contain the requisite claim certification language.
Innoventor, Inc., ASBCA No. 59903 (July 11, 2017)
In 2011, the government entered into a fixed-price contract with Innoventor for the design and manufacture of a dynamic brake test stand.  As part of the contract's purchase specifications, the new design had to undergo and pass certain testing.  After problems arose in the testing process, Innoventor submitted a proposal to modify certain design components and applied for an equitable adjustment due to "instability of expectations."  The contracting officer denied Innoventor's request for an equitable adjustment, stating that the government had not issued a modification directing a change that would give rise to such an adjustment.  Innoventor submitted a claim, which the contracting officer denied, and Innoventor appealed. The Board (Sweet, A.J.) held that the government was entitled to judgment as a matter of law because there was no evidence that the government changed Innoventor's performance requirements, let alone that anyone with authority directed any constructive changes.  Here, the contract was clear that Innoventor's design had to pass certain tests, and because it failed some of them, and did not perform pursuant to the contract terms, there was no change in the original contract terms that would give rise to a constructive change.  The Board also found that there was no evidence that any person beyond the contracting officer had authority to direct a change because the contract expressly provided that only the contracting officer has authority to change a contract.  Accordingly, the Board denied Innoventor's appeal.
L-3 Commc'ns Integrated Sys., L.P., ASBCA Nos. 60713 et al. (Sept. 27, 2017)
L-3 appealed from multiple final decisions asserting government claims for the recovery of purportedly unallowable airfare costs.  Rather than audit and challenge specific airfare costs, the Defense Contract Audit Agency simply applied a 79% "decrement factor" to all of L-3's international airfare costs over a specified dollar amount, claiming that this was justified based on prior-year audits.  After filing the appeals, L-3 moved to dismiss for lack of jurisdiction on the grounds that the government had failed to provide adequate notice of its claims by failing to identify which specific airfare costs were alleged to be unallowable, as well as the basis for those allegations. The Board (D'Alessandris, A.J.) denied the motion to dismiss, holding that the contracting officer's final decisions sufficiently stated a claim in that they set forth a sum certain and a basis for such a claim.  The Board held that L-3 had enough information to understand how the government reached its claim, and its contention that this was not a valid basis for the disallowance of costs for the year in dispute went to the merits and not the sufficiency of the final decisions.
Scott v. United States, No. 17-471 (Fed. Cl. Oct. 24, 2017)
Brian X. Scott brought a pro se claim in the Court of Federal Claims seeking monetary and injunctive relief for alleged harms arising from the Air Force's handling of his unsolicited proposal for contractual work.  Scott was an Air Force employee who submitted a proposal for countering the threat of a drone strike at the base where he was stationed.  The proposal was rejected, but Scott alleged that portions of the proposal were later partially implemented.  Scott sued, claiming that the Air Force failed properly to review his proposal and that his intellectual property was being misappropriated.  Scott argued that jurisdiction was proper under the Tucker Act because an implied-in-fact contract arose that prohibited the Air Force from using any data, concept, or idea from his proposal, which was submitted to a contracting officer with a restrictive legend consistent with FAR § 15.608. The Court of Federal Claims (Lettow, J.) found that it had jurisdiction under the Tucker Act because an implied-in-fact contract was formed when the Air Force became obligated to follow the FAR's regulatory constraints with regard to Scott's proposal.  Nevertheless, the Court granted the government's motion to dismiss because Scott's factual allegations, even taken in the light most favorable to him, did not plausibly establish that the government acted unreasonably or failed to properly evaluate his unsolicited proposal by using concepts from the proposal where Scott's proposal addressed a previously published agency requirement.

III.    COMMERCIAL SPACE SECTOR

A.    Overview of Private Space Launches and Significant Milestones

Space exploration is always fascinating—2017 and early 2018 was no exception.  Starting off in February 2017, India's Polar Satellite Launch Vehicle launched 104 satellites, setting a record for the number of satellites launched from a single rocket.[101]  In June, NASA finally unveiled its 12 chosen candidates for its astronaut program out of a pool of over 18,000 applicants, which was a record-breaking number.[102]  A few months later, NASA's Cassini spacecraft was intentionally plunged into Saturn, ending over a decade's worth of service.[103]  President Donald Trump also signed Space Policy Directive 1, which instructs NASA to send astronauts back to the moon, which President Trump noted would help establish a foundation for an eventual mission to Mars.[104] In what was widely expected to be a record year for private space launches, SpaceX and other private space companies clearly delivered.  In 2017, SpaceX, the company founded and run by Elon Musk, flew a record 18 missions utilizing the Falcon 9 rocket.[105]  Blue Origin, the company founded by Jeff Bezos, also made significant progress.  It was able to launch a new version of its New Shepard vehicle on its first flight, which Bezos hopes will lay the foundation for potential crewed missions.[106]  Then, in late December, California startup Made in Space sent a machine designed to make exotic ZBLAN optical fiber to the International Space Station.[107]  Without a doubt, 2017 played witness to many significant milestones in space exploration. Additional milestones have already been surpassed in early 2018.  February 6, 2018 was a historic date for Space technology and exploration—SpaceX's Falcon Heavy had its maiden launch.  The Falcon Heavy can carry payloads larger than any available commercial rocket, and it has the potential to launch payloads outside of Earth's orbit.  In fact, the Falcon Heavy did just that by launching a Tesla Roadster, driven by "Starman" into interplanetary space.  Starman will likely continue driving its orbit for millions of years.  It is only a matter of time until Starman is replaced with astronauts and the destination becomes Mars—SpaceX plans to launch such a mission in 2024.

B.    Update on Outer Space Treaty and Surrounding Debate

The Treaty on Principles Governing the Activities of States in the Exploration and Use of Outer Space, Including the Moon and Other Celestial Bodies, otherwise known as the Outer Space Treaty, recently celebrated its 50th anniversary.  Signed in 1967 and designed to prevent a new form of colonial competition, the Treaty was lauded for its principal framework on international space law.  Indeed, shortly after the Treaty was entered into force, the United States and the Soviet Union successfully collaborated on many space missions and exercises.[108] The Treaty is not complex.  Consisting of 17 short articles, the Treaty obligates its signatories to perform space exploration "for the benefit and interest of all countries" and to not "place in orbit around the Earth any objects carrying nuclear weapons or any other kinds of weapons of mass destruction."[109]  Having been in force for over 50 years, there have recently been discussions regarding whether the Treaty is ripe for an update.  Only as far back as half a decade ago, experts met in Australia to discuss moon-mining of anything from water and fuel to rare minerals in what was then a world's first "Off-Earth Mining Forum."[110]  Discussion surrounded the legality of such mining under the Treaty.  Then in 2014, NASA accepted applications from companies that desired to mine rare moon minerals in a program called "Lunar Cargo Transportation and Landing by Soft Touchdown."[111]  This once again sparked a debate on the legality of such actions, specifically lunar property rights. In 2017, the focus turned toward private and commercial space flight, and spurred conversation as to whether the 50-year-old treaty needed an update.  For one, the Treaty was designed, and has been entirely focused, on only individual countries.  Thus, there is an argument that the Treaty does not apply to private appropriation of celestial territory.  Second, the quaint nature of the Treaty has spawned efforts at tackling the private appropriation issues.  For instance, the United States passed the Space Act of 2015, which provides for private commercial "exploration and exploitation of space resources."[112]  The Act has incited further debate on the various legal loopholes that inherently afflict the Treaty and its ban on countries owning celestial territory. Meanwhile, the U.S. government has continued to find methods of regulation, specifically those involving the FAA and the Federal Communications Commission ("FCC"), among others.[113]  Now, lawmakers are purportedly discussing legislation that would provide a regulatory framework for private commercial space travel to adhere to the Treaty, as there currently does not exist a framework for the U.S. government to oversee the launch of private space stations.[114] Moreover, Senator Ted Cruz (R-TX) has been leading the charge on updating the Treaty to address issues related to modern spaceflight, where private commercial entities are playing an ever-increasing role.[115]  In May, Senator Cruz, the chairman of the Subcommittee on Space, Science, and Competitiveness, convened a hearing to "examine U.S. government obligations under the [Treaty]" and to also "explore the Treaty's potential impacts on expansion of our nation's commerce and settlement in space."[116]  Featuring a panel of legal experts and a panel of commercial space business leaders, the hearing raised a number of different viewpoints with one apparently unifying message: the Treaty should not be amended.  One of the panel members, Peter Marquez, while acknowledging that the Treaty is not perfect, expressed concern that opening up the Treaty to modifications would leave the space industry worse off, and would be a detriment to national and international security.[117] One area of particular interest was Article VI of the Treaty, which provides that nations authorize and supervise space activities performed by non-governmental entities, such as a private commercial space company.  The CEO of Moon Express, Bob Richards, noted that while the Treaty should remain unchanged, the U.S. should adopt a streamlined regulatory procedure and process to make approvals for space activities more efficient and clear.[118]  One of the legal experts sitting on the panel, Laura Montgomery, expressed her belief that the U.S. need not further regulate new commercial space because a close reading of the Treaty would indicate that mining and other similar activities do not require such governmental approvals.[119] While the ultimate general consensus appeared to be that no change to the Treaty was necessary to accomplish the goals of private commercial space enterprises, the hearing did bring to light the issues that currently confront modern space protocols.

C.    The American Space Commerce Free Enterprise Act of 2017, Which Seeks to Overhaul U.S. Commercial Space Licensing Regime, Passes Committee but Stalls in House

On June 7, 2017, House members led by Rep. Lamar Smith (R-TX), Chairman of the U.S. House Science, Space, and Technology Committee, introduced H.R. 2809—the American Space, Commerce, and Free Enterprise Act of 2017 ("ASCFEA").[120]  The bill, if adopted, would amend Title 51 of the United States Code to liberalize licensing requirements to conduct a variety of commercial space activities, while consolidating the licensing approval process for such activities under the authority of the U.S. Department of Commerce ("DOC").[121] The regulation of commercial space activities historically has been distributed among a variety of agencies—with the National Oceanic and Atmospheric Administration ("NOAA") governing remote sensing, the FCC governing communications satellites,[122] and the FAA/AST regulating launch, reentry, and some other non-traditional activities.[123]  But with that patchwork of authority, proponents of the Act believe there exists a regulatory gap for overseeing and authorizing new and innovative space activities.[124]  A primary goal of the Act is to address this perceived uncertainty, and in so doing, resolve long-standing questions associated with the United States' responsibility to regulate commercial space activities under the Outer Space Treaty,[125] which the bill's text references extensively. In its current form, the bill would grant the Office of Space Commerce (within the DOC) "the authority to issue certifications to U.S. nationals and nongovernmental entities for the operation of:  (1) specified human-made objects manufactured or assembled in outer space . . . and (2) all items carried on such objects that are intended for use in outer space."[126]  The bill further eliminates the Commercial Remote Sensing Regulatory Affairs Office of the NOAA, and vests authority to issue permits for remote sensing systems, again, in the DOC.[127]  The bill also creates a certification process for other "commercial payloads not otherwise licensed by the government," thereby providing fallback legislation for "non-traditional applications like satellite servicing, commercial space stations and lunar landers."[128]  The DOC hence would occupy all the regulatory authority for commercial space activities, except for the FCC and FAA/AST's current authority, which those agencies would maintain.[129] The commercial space industry supports the bill, and in particular the bill's apparent presumption in favor of regulatory approval.[130]  Industry also supports the bill's overhaul of the regulation of remote sensing—for example, the bill requires the DOC to issue a certification decision within just 60 days (or else the application is granted),[131] provide an explanation for any rejections, and grant every application that seeks authorization for activities involving "the same or substantially similar capabilities, derived data, products, or services are already commercially available or reasonably expected to be made available in the next 3 years in the international or domestic marketplace."[132] Some opponents of the bill contend that the consolidation of regulatory approval will limit interagency review, which is important because the DoD, State Department, and the intelligence community currently play some regulatory role in the review of aspects of new commercial space activities that are perceived to potentially pose a threat to national security.[133]  Others contend that the Office of Space Commerce has inadequate resources and experience to handle the regulatory approvals.  The bill seeks to ameliorate these concerns by authorizing $5 million in funding for the Office in 2018.[134]  The Department of Justice also has voiced some constitutional concerns.[135] The House referred the bill to the House Committee on Science, Space, and Technology,[136] which on June 8, 2017 passed three amendments by voice vote.[137]  Since being marked up in committee, the bill has seen no further action by the House.[138]  The DOC currently is seeking public input on possible changes to commercial space operations licensing more broadly.[139]

D.    Industry and Government Regulators Call for Changes to NOAA's Licensing of Remote Sensing Technology

ASCFEA's effort to strip NOAA of its authority to regulate remote sensing technology coincides with a growing number of complaints from the remote sensing industry and government regulators concerning NOAA's ability to handle an increased number of licensing applications.[140] The Land Remote Sensing Policy Act of 1992 authorized the Secretary of Commerce to "license private sector parties to operate private remote sensing space systems."[141]  But despite a sea change in remote sensing technology and activities since 1992, that law remains the main source of authority for remote sensing licensing, and Congress has made few modifications to the law since its inception.[142]  Given the speed of technological change, and increased industry competition, remote sensing companies are advocating for NOAA to adopt a "permissive" approach to licensing, akin to the language proposed in the ASCFEA.[143] NOAA's issues have been exacerbated by the fact that license applications are now more varied and complex than they were previously.[144]   Representatives from NOAA describe how prior to 2011, it took an average of 51 days to review license applications, since many applications sought permission for similar concepts for satellite systems.[145]  Even though the Land Remote Sensing Policy Act of 1992 calls for a 120-day approval window, in practice, applications now extend far longer than that—and further, NOAA sometimes provides little to no explanation about why it rejects particular applications.[146]  Under the ASCFEA, the DOC would be required to approve applications using the "same or substantially similar capabilities, derived data, products, or services as are already commercially available or reasonably expected to be made available in the next 3 years in the international or domestic marketplace."[147] Another complexity is that many companies develop technology that do not solely or traditionally perform remote sensing functions, but have remote sensing capabilities.[148]  The ASCFEA addresses this problem by offering exceptions for "De Minimis" uses of remote sensing technology.[150]

E.    Commercial Space Policy in the Trump Era

On December 11, 2017, President Trump signed White House Space Policy Directive 1, entitled "Reinvigorating America's Human Space Exploration Program."[151]  As the subject suggests, the Directive's goal is to bring a renewed focus on human space flight at a time when the United States lacks an organic capability to send American astronauts into low-Earth orbit, let alone beyond.[152]  Fittingly, President Trump signed the directive on the forty-fifth anniversary of the lunar landing of Apollo 17, with Apollo 17 astronaut Senator Harrison Schmitt present at the ceremony.[153] According to the Directive, the United States will "[l]ead an innovative and sustainable program of exploration with commercial and international partners to enable human expansion across the solar system…."[154]  The directive calls for missions beyond low-Earth orbit, with the United States "lead[ing] the return of humans to the Moon for long-term exploration and utilization, followed by human missions to Mars and other destinations."[155] NASA is already working with several commercial entities to develop transportation to and from low-Earth orbit, as well as to the International Space Station.[156]  And a call for a return to the moon for use as a stepping-stone to other destinations is not new with President Trump; previous administrations have expressed a similar desire.[157]  What remains to be seen is how this "long-term exploration" will be funded, with a good indicator being what "will be reflected in NASA's FISCAL Year 2019 budget request."[158]  Until then, "No bucks, no Buck Rogers."[159]

F.    Updates on Space Law in Luxembourg, India, and Australia

Luxembourg Continues its Push for Commercial Space Prominence
The small country of Luxembourg, a signatory to the Outer Space Treaty,[160] has major commercial space ambitions.  In 2016, Luxembourg passed a law to set aside €200 million to fund commercial space mining activities, and also offered to help interested companies obtain private financing.[161]  On July 13, 2017, following the United States' lead,[162] Luxembourg passed a law that gives qualifying companies the right to own any space resources they extract from celestial bodies including asteroids.[163]  The law further outlines a regulatory framework for "the government to authorize and supervise resource extraction and other space activities," except for communications satellites, which a different Luxembourg agency regulates.[164]  To qualify for a space mining license, companies must be centrally administered and own a registered office in Luxembourg, and also must obtain regulatory approval.[165]  It is as of now unclear whether the Luxembourg law (as well as the U.S.'s analogous law) violate the Outer Space Treaty, which prohibits companies from claiming territory on celestial bodies, but does not clarify whether that prohibition extends to materials extracted from those celestial bodies.[166]
India Unveils Draft of New Commercial Space Law; Sets Satellite Launch Record
In November 2017, the India Department of Space released and sought comments for the "Space Activities Act, 2017."[167]  The stated goal of the bill is to "encourage enhanced participation of non-governmental/private sector agencies in space activities in India."[168]  The bill as currently drafted vests authority in the Indian Government to formulate a licensing scheme for any and all "Commercial Space Activity," and states that licenses may be granted if the sought activity does not jeopardize public health or safety, and does not violate India's international treaty obligations, such as the Outer Space Treaty, to which India is a signatory.[169] India's space agency also made headlines this year when it sent 104 satellites into space in 18 minutes—purportedly tripling the prior record for single-day satellite launches.[170]  The New York Times reports that satellite and other orbital companies closely scrutinized the launch, since India's space agency is cheaper to employ for satellite launches than its European and North American counterparts.[171]
Australia Announced that It Will Create a Space Agency; Details Pending
In September 2017, Australia's Acting Minister for Industry, Innovation and Science announced that Australia will create a national space agency.[172]  While details are still pending, Australia's goal purportedly is to take advantage of the $300-$400 billion space economy, while creating Australian jobs in the process.[173]

IV.    CYBERSECURITY AND PRIVACY ISSUES IN THE NATIONAL AIRSPACE

A.    Cybersecurity Issues

The Federal Aviation Administration (FAA) has lagged behind other sectors in establishing robust cybersecurity and privacy safeguards in the national airspace, although federal policy identifies the transportation sector (which includes the aviation industry) as one of the 16 "critical infrastructure" sectors that have the ability to impact significantly the nation's security, economy, and public health and safety.[174]  The need for the FAA to establish robust safeguards is obvious, as the catastrophic impact of a cyber attack on the national airspace is not hard to imagine post-9/11.  Recently, one hacker claimed he compromised the cabin-based in-flight entertainment system to control a commercial airline engine in flight. One development of note is the reintroduction of the Cybersecurity Standards for Aircraft to Improve Resilience Act of 2017 by U.S. Senators Edward Markey and Richard Blumenthal.[175] Senator Markey first introduced legislation aimed at improving aircraft cyber security protection in April 2016, following a 2015 survey of U.S. airline CEOs to discover standard cybersecurity protocols used by the aviation industry.  If signed into law, the bill would require the U.S. Department of Transportation to work with DoD, Homeland Security, the Director of National Intelligence, and the FCC to incorporate requirements relating to cybersecurity into the requirements for certification.  Additionally, the bill would establish standard protections for all "entry points" to the electronic systems of aircraft operating in the U.S.  This would include the use of isolation measures to separate critical software systems from noncritical software systems.

B.    UAS Privacy Concerns

UAS are equipped with highly sophisticated surveillance technology with the ability to collect personal information, including physical location.  Senator Ayotte, Chair of the Subcommittee on Aviation Operations, Safety, and Security, summarized the privacy concerns drones pose as follows: "Unlimited surveillance by government or private actors is not something that our society is ready or willing or should accept.  Because [drones] can significantly lower the threshold for observation, the risk of abuse and the risk of abusive surveillance increases."  We describe below several recent federal and state efforts to address this issue.

1.    State Legislation Addressing Privacy Concerns

At least five out of the twenty-one states that either passed legislation or adopted resolutions related to UAS in 2017 specifically addressed privacy concerns.[176] Colorado HB 1070 requires the center of excellence within the department of public safety to perform a study that identifies ways to integrate UAS within local and state government functions relating to firefighting, search and rescue, accident reconstruction, crime scene documentation, emergency management, and emergencies involving significant property loss, injury or death.  The study must consider privacy concerns, in addition to costs and timeliness of deployment, for each of these uses. New Jersey SB 3370 allows UAS operation that is consistent with federal law, but also creates criminal offenses for certain UAS surveillance and privacy violations.  For example, using a UAS to conduct surveillance of a correction facility is a third degree crime.  Additionally, the law also applies the operation of UAS to limitations within restraining orders and specifies that convictions under the law are separate from other convictions such as harassment, stalking, and invasion of privacy. South Dakota SB 22 also prohibits operation of drones over the grounds of correctional and military facilities, making such operation a class 1 misdemeanor.  Further, the law modifies the crime of unlawful surveillance to include intentional use of a drone to observe, photograph or record someone in a private place with a reasonable expectation of privacy, and landing a drone on the property of an individual without that person's consent.  Such purportedly unlawful surveillance is a class 1 misdemeanor unless the individual is operating the drone for commercial or agricultural purposes, or the individual is acting within his or her capacity as an emergency management worker. Utah HB 217 modifies criminal trespass to include drones entering and remaining unlawfully over property with specified intent.  Depending on the intent, a violation is either a class B misdemeanor, a class A misdemeanor, or an infraction, unless the person is operating a UAS for legitimate commercial or educational purposes consistent with FAA regulations.  Utah HB 217 also modifies the offense of voyeurism, a class B misdemeanor, to include the use of any type of technology, including UAS, to secretly record video of a person in certain instances. Virginia HB 2350 makes it a Class 1 misdemeanor to use UAS to trespass upon the property of another for the purpose of secretly or furtively peeping, spying, or attempting to peep or spy into a dwelling or occupied building located on such property.

2.    UAS Identification and Tracking Report

The FAA chartered an Aviation Rulemaking Committee ("ARC") in June 2017 to provide recommendations on the technologies available for remote identification and tracking of UAS, and how remote identification may be implemented.[177]  However, the ARC's 213 page final report, dated September 30, 2017, notes that the ARC lacked sufficient time to fully address privacy and data protection concerns, and that therefore those topics were not addressed: [T]he ARC also lacks sufficient time to perform an exhaustive analysis of all the privacy implications of remote ID, tracking, or UTM, and did not specifically engage with privacy experts, from industry or otherwise, during this ARC.  These members agree, however, that it is fundamentally important that privacy be fully considered and that appropriate privacy protections are in place before data collection and sharing by any party (either through remote ID and/or UTM) is required for operations.  A non-exhaustive list of important privacy considerations include, amongst other issues, any data collection, retention, sharing, use and access.  Privacy must be considered with regard to both PII and historical tracking information.  The privacy of all individuals (including operators and customers) should be addressed, and privacy should be a consideration during the rulemaking for remote ID and tracking.

Accordingly, the ARC recognizes the fundamental importance of fully addressing privacy and data protection concerns, and we anticipate that future rulemaking will address these issues.

IV.    CONCLUSION

We will continue to keep you informed on these and other related issues as they develop.
[1] See Huerta, No. 3:16-cv-358, Dkt. No. 30. [2] Id. [3] Id. [4] See Boggs, No. 3:16-cv-00006, Dkt. No. 1 (W.D. Ky. Jan. 4, 2016). [5] See id. [6] See Boggs, No. 3:16-cv-00006, Dkt. No. 20 (W.D. Ky. Jan. 4, 2016). [7] See id. [8] See Singer, No. 1:17-cv-10071, Dkt. N. 63 (D. Mass. Jan. 17, 2017). [9] See id. [10] See id. [11] See id. [12] See id. [13] See Taylor v. Huerta, 856 F.3d 1089 (D.C. Cir. 2017). [14] See Pub. L. No. 112–95, § 336(a), 126 Stat. 11, 77 (2012) (codified at 49 U.S.C. § 40101 note). [15] See Taylor, 856 F.3d at 1090. [16] See Pub. L. No. 115–91, § 3 1092(d), (2017). [17] The White House, Office of the Press Secretary, Presidential Memorandum:  Promoting Economic Competitiveness While Safeguarding Privacy, Civil Rights, and Civil Liberties in Domestic Use of Unmanned Aircraft Systems, Feb. 15, 2015, available at https://obamawhitehouse.archives.gov/the-press-office/2015/02/15/presidential-memorandum-promoting-economic-competitiveness-while-safegua. [18] Operation and Certification of Small Unmanned Aircraft Systems, 81 Fed. Reg. 42064 (June 28, 2016). [19] Electronic Privacy Information Center ("EPIC"), EPIC v. FAA: Challenging the FAA's Failure to Establish Drone Privacy Rules, https://epic.org/privacy/litigation/apa/faa/drones/ (last visited Jan. 18, 2018). [20] See generally Electronic Privacy Information Center v. FAA (EPIC I), 821 F.3d 39, 41-42 (D.C. Cir. 2016) (noting that FAA denied EPIC's petition for rulemaking requesting that the FAA consider privacy concerns). [21] Voluntary Best Practices for UAS Privacy, Transparency, and Accountability, NTIA-Convened Multistakeholder Process (May 18, 2016), https://www.ntia.doc.gov/files/ntia/publications/ uas_privacy_best_practices_6-21-16.pdf. [22] EPIC, supra, note xix. [23] EPIC I, supra, note xx, at 41. [24] Id. 41-42. [25] Id. [26] Id. [27] Id. at 42-43. [28] Id. at 42. [29] Id. at 43. [30] Pet. For Review, Electronic Privacy Information Center v. FAA (EPIC II), Nos. 16-1297, 16-1302 (Filed Aug. 22, 2016), https://epic.org/privacy/litigation/apa/faa/drones/EPIC-Petition-08222016.pdf. [31] Appellant Opening Br., EPIC II, Nos. 16-1297, 16-1302 (Filed Feb. 28, 2017), https://epic.org/privacy/litigation/apa/faa/drones/1663292-EPIC-Brief.pdf. [32] Appellee Reply Br., EPIC II, Nos. 16-1297, 16-1302 (Filed April 27, 2017), https://epic.org/privacy/litigation/apa/faa/drones/1673002-FAA-Reply-Brief.pdf. [33] United States Court of Appeals District of Columbia Circuit, Oral Argument Calendar, https://www.cadc.uscourts.gov/internet/sixtyday.nsf/fullcalendar?OpenView&count=1000 (last visited Jan. 18, 2018). [34] United States Department of Defense, Unmanned Systems Integrated Roadmap (2013), https://dod.defense.gov/Portals/1/Documents/pubs/DOD-USRM-2013.pdf. [35] Andrew Meola, Drone Marker Shows Positive Outlook with Strong Industry Growth and Trends, Business Insider, July 13, 2017, available at http://www.businessinsider.com/drone-industry-analysis-market-trends-growth-forecasts-2017-7. [36] Office of the Under Secretary of Defense, U.S. Department of Defense Fiscal Year 2017 Budget Request (Feb. 2016). [37] Office of the Under Secretary of Defense, U.S. Department of Defense Fiscal Year 2018 Budget Request (May 2017). [38] Goldman Sachs, Drones: Reporting for Work, http://www.goldmansachs.com/our-thinking/technology-driving-innovation/drones/ (last visited Jan. 18, 2017). [39] Id. [40] Chris Woods, The Story of America's Very First Drone Strike, The Atlantic, May 30, 2016, available at https://www.theatlantic.com/international/archive/2015/05/america-first-drone-strike-afghanistan/394463/. [41] Deputy Secretary of Defense, Policy Memorandum 15-002, "Guidance for the Domestic Use of Unmanned Aircraft Systems" (Feb. 17, 2015), https://dod.defense.gov/Portals/1/Documents/Policy%20Memorandum%2015-002%20_Guidance%20for%20the%20Domestic%20Use%20of%20Unmanned%20Aircraft%20Systems_.pdf. [42] Id. [43] Id. [44] Id. [45] Id. [47] Id. [48] Eric Schmitt, Pentagon Tests Lasers and Nets to Combat Vexing Foe: ISIS Drones, N.Y. Times, Sept. 23, 2017, available at https://www.nytimes.com/2017/09/23/world/middleeast/isis-drones-pentagon-experiments.html. [49] Id. [50] Christopher Woody, The Pentagon is Getting Better at Stopping Enemy Drones—and Testing Its Own for Delivering Gear to the Battlefield, Business Insider, Apr. 24, 2017, available at https://www.businessinsider.com/military-adding-drones-and-drone-defense-to-its-arsenal-2017-4. [51] Id. [52] Radio Hill Technology, Birth of the Dronebuster, http://www.radiohill.com/product/ (last visited Jan. 18, 2018). [53] Id. [54] Kyle Mizokami, The Army's Drone-Killing Lasers are Getting a Tenfold Power Boost, Popular Mechanics, July 18, 2017, available at http://www.popularmechanics.com/military/research/news/a27381/us-army-drone-killing-laser-power/. [55] Sydney J. Freedberg Jr., Drone Killing Laser Stars in Army Field Test, Breaking Defense, May 11, 2017, available at https://breakingdefense.com/2017/05/drone-killing-laser-stars-in-army-field-test/. [56] Mizokami, supra, note lv. [57] ASSURE, UAS Ground Collision Severity Evaluation Final Report, United States (2017), available at http://www.assureuas.org/projects/deliverables/sUASGroundCollisionReport.php?Code=230 (ASSURE Study). [58] Id. [59] Id. [60] Id. [61] DJI, DJI Welcomes FAA-Commissioned Report Analyzing Drone Safety Near People, Newsroom News, Apr. 28, 2017, available at https://www.dji.com/newsroom/news/dji-welcomes-faa-commissioned-report-analyzing-drone-safety-near-people. [62] Id. [63] Id. [64] ASSURE Study, supra note lviii. [65] Id. [66] Id. [67] Id. [68] Id. [69] ASSURE, FAA and Assure Announce Results of Air-to-Air Collision Study, ASSURE: Alliance for System Safety of UAS through Research Excellence, Nov. 27, 2017, available at https://pr.cirlot.com/faa-and-assure-announce-results-of-air-to-air-collision-study/. [70] Id. [71] ASSURE Study, supra note lviii. [72] Id. [73] Id. [74] Id. [75] See Pathiyil, et al., Issues of Safety and Risk management for Unmanned Aircraft Operations in Urban Airspace, 2017 Workshop on Research, Education and Development of Unmanned Aerial Systems (RED-UAS), Oct. 3, 2017, available at http://ieeexplore.ieee.org/stamp/stamp.jsp?arnumber=8101671. [76] Id. [77] Id. [78] Id. [79] Id. [80] Patrick C. Miller, 2,800 Interested Parties Apply for UAS Integration Pilot Program, UAS Magazine, Jan. 3, 2018, available at http://www.uasmagazine.com/articles/1801/2-800-interested-parties-apply-for-uas-integration-pilot-program. [81] Unmanned Aircraft Systems Integration Pilot Program, 82 Fed. Reg. 50,301 (Oct. 25, 2017) (Presidential directive creating the program); see also Unmanned Aircraft Systems Integration Pilot Program—Announcement of Establishment of Program and Request for Applications, 82 Fed. Reg. 215 (Nov. 8, 2017) (Department of Transportation Notice of the UAS Pilot Program). [82] See id. [83] See id. [84] Elaine Goodman, Blood Deliveries by Drone Proposed—City Submits Unique Ideas to FAA, Daily Post, Jan. 5, 2018, available at http://padailypost.com/2018/01/05/blood-deliveries-by-drone-proposed-city-submits-unique-ideas-to-faa/. [85] Id. [86] Id. [87] Id. [88] Id. [89] Miller, supra note lxxxi. [90] Id. [91] Id. [92] Id. [93] Id. [101]   NASA Spaceflight, India's PSLV deploys a record 104 satellites (Feb. 14, 2017), available at https://www.nasaspaceflight.com/2017/02/indias-pslv-record-104-satellites/. [102]   NASA, NASA's Newest Astronaut Recruits to Conduct Research off the Earth, For the Earth and Deep Space Missions (June 7, 2017), available at https://www.nasa.gov/press-release/nasa-s-newest-astronaut-recruits-to-conduct-research-off-the-earth-for-the-earth-and. [103]   NASA, Cassini Spacecraft Ends Its Historic Exploration of Saturn (Sept. 15, 2017), available at https://www.nasa.gov/press-release/nasa-s-cassini-spacecraft-ends-its-historic-exploration-of-saturn. [104]   NASA, New Space Policy Directive Calls for Human Expansion Across Solar System (Dec. 11, 2017), available at https://www.nasa.gov/press-release/new-space-policy-directive-calls-for-human-expansion-across-solar-system. [105]   TechCrunch, SpaceX caps a record year with 18th successful launch of 2017 (Dec. 22, 2017), available at https://techcrunch.com/2017/12/22/spacex-caps-a-record-year-with-18th-successful-launch-of-2017/. [106]   The Verge, After a year away from test flights, Blue Origin launches and lands its rocket again (Dec. 12, 2017), available at https://www.theverge.com/2017/12/12/16759934/blue-origin-new-shepard-test-flight-launch-landing. [107]   Space.com, SpaceX Launches (and Lands) Used Rocket on Historic NASA Cargo Mission (Dec. 15, 2017), available at https://www.space.com/39063-spacex-launches-used-rocket-dragon-spacecraft-for-nasa.html. [108]   U.S. Department of State, Treaty on Principles Governing the Activities of States in the Exploration and Use of Outer Space, Including the Moon and Other Celestial Bodies, available at https://www.state.gov/t/isn/5181.htm#treaty. [109] NTI, Treaty on Principles Governing the Activities of States in the Exploration and Use of Outer Space, Including the Moon and Other Celestial Bodies (Outer Space Treaty) (Feb. 1, 2017), available at http://www.nti.org/learn/treaties-and-regimes/treaty-principles-governing-activities-states-exploration-and-use-outer-space-including-moon-and-other-celestial-bodies-outer-space-treaty/. [110] PHYS.ORG, Space likely for rare earth search, scientists say (Feb. 20, 2013), available at https://phys.org/news/2013-02-space-rare-earths-scientists.html. [111]   NASA, Lunar CATALYST (Jan. 16, 2014), available at https://www.nasa.gov/content/lunar-catalyst/#.WmLx1qinGHs. [112]   The Conversation, The Outer Space Treaty has been remarkably successful – but is it fit for the modern age? (Jan. 27, 2017), available at http://theconversation.com/the-outer-space-treaty-has-been-remarkably-successful-but-is-it-fit-for-the-modern-age-71381. [113]   The Verge, How an international treaty signed 50 years ago became the backbone for space law (Jan. 27, 2017), available at https://www.theverge.com/2017/1/27/14398492/outer-space-treaty-50-anniversary-exploration-guidelines. [114]   Id. [115]   The Space Review, Is it time to update the Outer Space Treaty? (June 5, 2017), available at http://www.thespacereview.com/article/3256/1. [116]   U.S. Senate, Reopening the American Frontier:  Exploring How the Outer Space Treaty Will Impact American Commerce and Settlement in Space (May 23, 2017), available at https://www.commerce.senate.gov/public/index.cfm/hearings?ID=5A91CD95-CDA5-46F2-8E18-2D2DFCAE4355. [117]   The Space Review, supra note cxvi. [118]   Id. [119]   Id. [120] H.R. Rep No. 2809 (2017), available at https://www.congress.gov/bill/115th-congress/house-bill/2809.  The other primary sponsors of the bill are Brian Babin (R-TX), chairman of the space subcommittee; and Rep. Jim Bridenstine (R-OK). [121] Sandy Mazza, Space exploration regulations need overhaul, new report says, Daily Breeze (Dec. 2, 2017), https://www.dailybreeze.com/2017/12/02/space-exploration-regulations-need-overhaul-new-report-says/.  The Act's stated purpose is to "provide greater transparency, greater efficiency, and less administrative burden for nongovernmental entities of the United States seeking to conduct space activities."  H.R. Rep No. 2809 (2017), available at https://www.congress.gov/bill/115th-congress/house-bill/2809 (Section 2(c)). [122] Jeff Foust, House bill seeks to streamline oversight of commercial space activities, Space News (June 8, 2017), http://spacenews.com/house-bill-seeks-to-streamline-oversight-of-commercial-space-activities/. [123] Marcia Smith, New Commercial Space Bill Clears House Committee, Space Policy Online (June 8, 2017), https://spacepolicyonline.com/news/new-commercial-space-bill-clears-house-committee/. [124] Under the Obama administration, many in government and industry presumed that the regulation of new space activities would fall to FAA/AST.  See Marcia Smith, New Commercial Space Bill Clears House Committee, Space Policy Online (June 8, 2017), https://spacepolicyonline.com/news/new-commercial-space-bill-clears-house-committee/ (In fact, the agency heads of the FAA/AST, and the Office of Science and Technology Policy, recommended the same). [125] Marcia Smith, Companies Agree FAA Best Agency to Regulate Non-Traditional Space Activities, Space Policy Online (Nov. 15, 2017), https://spacepolicyonline.com/news/companies-agree-faa-best-agency-to-regulate-non-traditional-space-activities/. [126] H.R. Rep No. 2809 (2017), available at https://www.congress.gov/bill/115th-congress/house-bill/2809. [127] Id. [128] Jeff Foust, House bill seeks to streamline oversight of commercial space activities, Space News (June 8, 2017), http://spacenews.com/house-bill-seeks-to-streamline-oversight-of-commercial-space-activities/. [129] Marcia Smith, New Commercial Space Bill Clears House Committee, Space Policy Online (June 8, 2017), https://spacepolicyonline.com/news/new-commercial-space-bill-clears-house-committee/. [130] Marcia Smith, New Commercial Space Bill Clears House Committee, Space Policy Online (June 8, 2017), https://spacepolicyonline.com/news/new-commercial-space-bill-clears-house-committee/; Marcia Smith, Companies Agree FAA Best Agency to Regulate Non-Traditional Space Activities, Space Policy Online (Nov. 15, 2017), https://spacepolicyonline.com/news/companies-agree-faa-best-agency-to-regulate-non-traditional-space-activities/.  The bill, for example, requires e the Secretary of Commerce to issue certifications or permits for commercial space activities, unless, for example, the Secretary finds by "clear and convincing evidence" that the permit would violate the Outer Space Treaty.  Bob Zimmerman, What You Need To Know About The Space Law Congress Is Considering, The Federalist (July 11, 2017), http://thefederalist.com/2017/07/11/need-know-space-law-congress-considering/.  Indeed, the policy section of the bill finds that "United States citizens and entities are free to explore and use space, including the utilization of outer space and resources contained therein, without conditions or limitations" and "this freedom is only to be limited when necessary to assure United States national security interests are met" or fulfill treaty obligations.  H.R. Rep No. 2809 (2017), available at https://www.congress.gov/bill/115th-congress/house-bill/2809. [131] Jeff Foust, House bill seeks to streamline oversight of commercial space activities, Space News (June 8, 2017), http://spacenews.com/house-bill-seeks-to-streamline-oversight-of-commercial-space-activities/. [132] Joshua Hampson, The American Space Commerce Free Enterprise Act, Niskanen Center (June 15, 2017), https://niskanencenter.org/blog/american-space-commerce-free-enterprise-act/. [133] Jeff Foust, House bill seeks to streamline oversight of commercial space activities, Space News (June 8, 2017), http://spacenews.com/house-bill-seeks-to-streamline-oversight-of-commercial-space-activities/. [134] Jeff Foust, House bill seeks to streamline oversight of commercial space activities, Space News (June 8, 2017), http://spacenews.com/house-bill-seeks-to-streamline-oversight-of-commercial-space-activities/; Congressional Budget Office Cost Estimate, Congressional Budget Office (July 7, 2017), https://www.cbo.gov/system/files/115th-congress-2017-2018/costestimate/hr2809.pdf. [135] Samuel R. Ramer, Letter from the Office of the Assistant Attorney General, Justice Department (July 17, 2017), https://www.justice.gov/ola/page/file/995646/download. [136] H.R. Rep No. 2809 (2017), available at https://www.congress.gov/bill/115th-congress/house-bill/2809/all-actions. [137] Marcia Smith, New Commercial Space Bill Clears House Committee, Space Policy Online (June 8, 2017), https://spacepolicyonline.com/news/new-commercial-space-bill-clears-house-committee/. [138] Jeffrey Hill, Congressman Babin Hints that Cybersecurity Could be Included in Larger Commercial Space Legislative Package, Satellite Today (Nov. 7, 2017), http://www.satellitetoday.com/government/2017/11/07/cybersecurity-featured-space-commerce-act/. [139] Commerce Department Now Accepting Public Inputs on Regulatory Streamlining, Space Commerce (Oct. 27, 2017), http://www.space.commerce.gov/commerce-department-now-accepting-public-inputs-on-regulatory-streamlining/; Sandy Mazza, Space exploration regulations need overhaul, new report says, Daily Breeze (Dec. 2, 2017), https://www.dailybreeze.com/2017/12/02/space-exploration-regulations-need-overhaul-new-report-says/. [140] Sean Kelly, The new national security strategy prioritizes space, The Hill (Jan. 3, 2018), http://thehill.com/opinion/national-security/367240-the-new-national-security-strategy-prioritizes-space; Jeff Foust, House panel criticizes commercial remote sensing licensing, Space News (Sept. 8, 2016), http://spacenews.com/house-panel-criticizes-commercial-remote-sensing-licensing/.  Critics argue that the NOAA's approval pace is harming U.S. companies to the benefit of foreign competitors. Randy Showstack, Remote Sensing Regulations Come Under Congressional Scrutiny, EOS (Sept. 14, 2016), https://eos.org/articles/remote-sensing-regulations-come-under-congressional-scrutiny. [141] H.R. Rep No. 6133 (1992), available at https://www.congress.gov/bill/102nd-congress/house-bill/6133. [142] Randy Showstack, Remote Sensing Regulations Come Under Congressional Scrutiny, EOS (Sept. 14, 2016), https://eos.org/articles/remote-sensing-regulations-come-under-congressional-scrutiny.  Indeed, the Commercial Space Launch Competitiveness Act, signed into law in November 2016, requires the Department of Commerce to analyze possible statutory updates to the remote sensing licensing scheme.  Jeff Foust, House panel criticizes commercial remote sensing licensing, Space News (Sept. 8, 2016), http://spacenews.com/house-panel-criticizes-commercial-remote-sensing-licensing/.  The text of the ASCFEA also recognizes that since "the passage of the Land Remote Sensing Policy Act of 1992, the National Oceanic and Atmospheric Administration's Office of Commercial Remote Sensing has experienced a significant increase in applications for private remote sensing space system licenses . . ."  H.R. Rep No. 2809 (2017), available at https://www.congress.gov/bill/115th-congress/house-bill/2809. [143] Joshua Hampson, The American Space Commerce Free Enterprise Act, Niskanen Center (June 15, 2017), https://niskanencenter.org/blog/american-space-commerce-free-enterprise-act/.  The ASCFEA defines a Space-Based Remote Sensing System as "a space object in Earth orbit that is "(A) designed to image the Earth; or (B) capable of imaging a space object in Earth orbit operated by the Federal Government."  H.R. Rep No. 2809 (2017), available at https://www.congress.gov/bill/115th-congress/house-bill/2809. [144] Jeff Foust, Commercial remote sensing companies seek streamlined regulations, Space News (Mar. 17, 2017), http://spacenews.com/commercial-remote-sensing-companies-seek-streamlined-regulations/. [145] Id. [146] Jeff Foust, House panel criticizes commercial remote sensing licensing, Space News (Sept. 8, 2016), http://spacenews.com/house-panel-criticizes-commercial-remote-sensing-licensing/. [147] H.R. Rep No. 2809 (2017), available at https://www.congress.gov/bill/115th-congress/house-bill/2809 (Chapter 8012 § 80202(e)(1)). [148] Jeff Foust, Commercial remote sensing companies seek streamlined regulations, Space News (Mar. 17, 2017), http://spacenews.com/commercial-remote-sensing-companies-seek-streamlined-regulations/. [150] H.R. Rep No. 2809 (2017), available at https://www.congress.gov/bill/115th-congress/house-bill/2809 (Chapter 802 § 80201(d)). [151] Reinvigorating America's Human Space Exploration Program, 82 Fed. Reg. 59501 (Dec. 11, 2017) [152] Nell Greenfieldboyce, President Trump Is Sending NASA Back to the Moon (Dec. 11, 2017) available at https://www.npr.org/sections/thetwo-way/2017/12/11/569936446/president-trump-is-sending-nasa-back-to-the-moon. [153] See Press Release, NASA, New Space Policy Directive Calls for Human Expansion Across Solar System (Dec. 11, 2017); see also NASA, https://www.nasa.gov/mission_pages/apollo/missions/apollo17.html (last visited Jan. 21, 2018). [154] Reinvigorating America's Human Space Exploration Program, supra note clii. [155] Id. [156] NASA, Commercial Crew Program – The Essentials, available at https://www.nasa.gov/content/commercial-crew-program-the-essentials/#.VjOJ3berRaT. [157] Michael Sheetz, Trump Orders NASA to Send American Astronauts to the Moon, Mars, CNBC (Dec. 11, 2017) available at https://www.cnbc.com/2017/12/11/trump-orders-nasa-to-send-american-astronauts-to-the-moon-mars.html. [158] See New Space Policy Directive Calls for Human Expansion Across Solar System, supra note cv; see also Christian Davenport, Trump Vows Americans Will Return to the Moon.  The Question Is How?, (Dec. 11, 2017) available at https://www.washingtonpost.com/news/the-switch/wp/2017/12/11/trump-vows-americans-will-return-to-the-moon-the-question-is-how/?utm_term=.4ceb20131cdf. [159] The Right Stuff (The Ladd Company 1983). [160] Laurent Thailly and Fiona Schneider, Luxembourg set to become Europe's commercial space exploration hub with new Space law, Ogier (Jan. 8, 2017), https://www.ogier.com/news/the-luxembourg-space-law. [161] Reuters Staff, Luxembourg sets aside 200 million euros to fund space mining ventures, Reuters (June 3, 2016), https://www.reuters.com/article/us-luxembourg-space-mining/luxembourg-sets-aside-200-million-euros-to-fund-space-mining-ventures-idUSKCN0YP22H; Laurent Thailly and Fiona Schneider, Luxembourg set to become Europe's commercial space exploration hub with new Space law, Ogier (Jan. 8, 2017), https://www.ogier.com/news/the-luxembourg-space-law.  Luxembourg invested €23 million in U.S. company Planetary Resources, and now owns a 10% share in the company.  Kenneth Chang, If no one owns the moon, can anyone make money up there?, The Independent (Dec. 4, 2017), http://www.independent.co.uk/news/long_reads/if-no-one-owns-the-moon-can-anyone-make-money-up-there-space-astronomy-a8087126.html. [162] In 2015, the U.S. passed the Commercial Space Launch Competitiveness Act, which clarified that companies that extract materials from celestial bodies can own those materials.  Andrew Silver, Luxembourg passes first EU space mining law. One can possess the Spice, The Register (July 14, 2017), https://www.theregister.co.uk/2017/07/14/luxembourg_passes_space_mining_law/. [163] Jeff Foust, Luxembourg adopts space resources law, Space News (July 17, 2017), http://spacenews.com/luxembourg-adopts-space-resources-law/. [164] Jeff Foust, Luxembourg adopts space resources law, Space News (July 17, 2017), http://spacenews.com/luxembourg-adopts-space-resources-law;  Paul Zenners, Press Release, Space Resources (July 13, 2017), http://www.spaceresources.public.lu/content/dam/spaceresources/press-release/2017/2017_07_13%20PressRelease_Law_Space_Resources_EN.pdf. [165] Laurent Thailly and Fiona Schneider, Luxembourg set to become Europe's commercial space exploration hub with new Space law, Ogier (Jan. 8, 2017), https://www.ogier.com/news/the-luxembourg-space-law.  Reportedly, two American companies already plan to move to Luxembourg:  Deep Space Industries and Planetary Resources. Vasudevan Mukunth, Fiat Luxembourg: How a Tiny European Nation is Leading the Evolution of Space Law, The Wire (July 15, 2017), https://thewire.in/157687/luxembourg-space-asteroid-mining-dsi/. [166] Andrew Silver, Luxembourg passes first EU space mining law. One can possess the Spice, The Register (July 14, 2017), https://www.theregister.co.uk/2017/07/14/luxembourg_passes_space_mining_law/;  Mark Kaufman, Luxembourg's Asteroid Mining is Legal Says Space Law Expert, inverse.com (Aug. 1, 2017), https://www.inverse.com/article/34935-luxembourg-s-asteroid-mining-is-legal-says-space-law-expert. [167] Antariksh Bhavan, Seeking comments on Draft "Space Activities Bill, 2017" from the stake holders/public-regarding, ISRO (Nov. 21, 2017), https://www.isro.gov.in/update/21-nov-2017/seeking-comments-draft-space-activities-bill-2017-stake-holders-public-regarding;  Special Correspondent, Govt. unveils draft of law to regulate space sector, The Hindu (Nov. 22, 2017), http://www.thehindu.com/sci-tech/science/govt-unveils-draft-of-law-to-regulate-space-sector/article20629386.ece;  Raghu Krishnan & T E Narasimhan, Draft space law gives private firms a grip on rocket, satellite making, Business Standard (Nov. 22, 2017), http://www.business-standard.com/article/economy-policy/draft-space-law-gives-private-firms-a-grip-on-rocket-satellite-making-117112101234_1.html. [168] Antariksh Bhavan, Seeking comments on Draft "Space Activities Bill, 2017" from the stake holders/public-regarding, ISRO (Nov. 21, 2017), https://www.isro.gov.in/update/21-nov-2017/seeking-comments-draft-space-activities-bill-2017-stake-holders-public-regarding. [169] Id. [170] Ellen Barry, India Launches 104 Satellites From a Single Rocket, Ramping Up a Space Race, The New York Times (Feb. 15, 2017), https://www.nytimes.com/2017/02/15/world/asia/india-satellites-rocket.html. [171] Id. [172] Yes, Australia will have a space agency. What does this mean? Experts respond, The Conversation (Sept. 25, 2017), http://theconversation.com/yes-australia-will-have-a-space-agency-what-does-this-mean-experts-respond-84588;  Jordan Chong, Better late than never, Australia heads (back) to space, Australian Aviation (Dec. 29, 2017), http://australianaviation.com.au/2017/12/better-late-than-never-australia-heads-back-to-space/. [173] Andrew Griffin, Australia launches brand new space agency in attempt to flee the Earth, The Independent (Sept. 25, 2017), http://www.independent.co.uk/news/science/australia-space-agency-nasa-earth-roscosmos-malcolm-turnbull-economy-a7966751.html;  Henry Belot, Australian space agency to employ thousands and tap $420b industry, Government says, ABC (Sept. 25, 2017), http://www.abc.net.au/news/2017-09-25/government-to-establish-national-space-agency/8980268. [174]   White House, Critical Infrastructure Security and Resilience, Presidential Policy Directive/PPD-21 (Feb. 12, 2013). [175]   Woodrow Bellamy III, Senators Reintroduce Aircraft Cyber Security Legislation, Aviation Today (Mar. 24, 2017), http://www.aviationtoday.com/2017/03/24/senators-reintroduce-aircraft-cyber-security-legislation/. [176]   The eighteen states that passed UAS legislation in 2017 were Colorado, Connecticut, Florida, Georgia, Indiana, Kentucky, Louisiana, Minnesota, Montana, Nevada, New Jersey, North Carolina, Oregon, South Dakota, Texas, Utah, Virginia and Wyoming. The three states that passed resolutions related to UAS were Alaska, North Dakota and Utah. [177]   Under Section 2202 of the FAA Extension, Safety, and Security Act of 2016, Pub. L. 114-190, Congress directed the FAA to convene industry stakeholders to facilitate the development of consensus standards for identifying operators and UAS owners.  The final report identifies the following as the ARC's stated objectives:
The stated objectives of the ARC charter were: to identify, categorize and recommend available and emerging technology for the remote identification and tracking of UAS; to identify the requirements for meeting the security and public safety needs of the law enforcement, homeland defense, and national security communities for the remote identification and tracking of UAS; and to evaluate the feasibility and affordability of available technical solutions, and determine how well those technologies address the needs of the law enforcement and air traffic control communities.
The final ARC report is available at: https://www.faa.gov/regulations_policies/rulemaking/committees/documents/media/UAS%20ID%20ARC%20Final%20Report%20with%20Appendices.pdf.
Gibson Dunn lawyers are available to assist in addressing any questions you may have regarding the issues discussed above. Please contact the Gibson Dunn lawyer with whom you usually work, any member of the Aerospace and Related Technologies industry group, or any of the following: Washington, D.C. Karen L. Manos - Co-Chair (+1 202-955-8536, kmanos@gibsondunn.com) Lindsay M. Paulin (+1 202-887-3701, lpaulin@gibsondunn.com) Erin N. Rankin (+1 202-955-8246, erankin@gibsondunn.com) Christopher T. Timura (+1 202-887-3690, ctimura@gibsondunn.com) Justin P. Accomando (+1 202-887-3796, jaccomando@gibsondunn.com) Brian M. Lipshutz (+1 202-887-3514, blipshutz@gibsondunn.com) Melinda R. Biancuzzo (+1 202-887-3724, mbiancuzzo@gibsondunn.com) New York David M. Wilf - Co-Chair (+1 212-351-4027, dwilf@gibsondunn.com) Alexander H. Southwell (+1 212-351-3981, asouthwell@gibsondunn.com) Nicolas H.R. Dumont (+1 212-351-3837, ndumont@gibsondunn.com) Eun Sung Lim (+1 212-351-2483, elim@gibsondunn.com) Los Angeles William J. Peters - Co-Chair (+1 213-229-7515, wpeters@gibsondunn.com) David A. Battaglia (+1 213-229-7380, dbattaglia@gibsondunn.com) Perlette M. Jura (+1 213-229-7121, pjura@gibsondunn.com) Eric D. Vandevelde (+1 213-229-7186, evandevelde@gibsondunn.com) Matthew B. Dubeck (+1 213-229-7622, mdubeck@gibsondunn.com) Lauren M. Fischer (+1 213-229-7983, ) Dhananjay S. Manthripragada (+1 213-229-7366, dmanthripragada@gibsondunn.com) James A. Santiago (+1 213-229-7929, ) Denver Jared Greenberg (+1 303-298-5707, jgreenberg@gibsondunn.com) London Mitri J. Najjar (+44 (0)20 7071 4262, mnajjar@gibsondunn.com) Orange County Casper J. Yen (+1 949-451-4105, cyen@gibsondunn.com) Rustin K. Mangum (+1 949-451-4069, rmangum@gibsondunn.com) Sydney Sherman (+1 949-451-3804, ) Paris Ahmed Baladi (+33 (0)1 56 43 13 00, abaladi@gibsondunn.com) San Francisco Kristin A. Linsley (+1 415-393-8395, ) Matthew Reagan (+1 415-393-8314, mreagan@gibsondunn.com) © 2018 Gibson, Dunn & Crutcher LLP Attorney Advertising:  The enclosed materials have been prepared for general informational purposes only and are not intended as legal advice.

October 5, 2017 |
Local Drone Law Preempted in First-of-its-Kind Ruling

​Orange County associates Jared Greenberg and Brett Long are the authors of "Local Drone Law Preempted in First-of-its-Kind Ruling," [PDF] published by The Daily Journal on October 5, 2017.

May 4, 2017 |
Who controls Low-Altitude Airspace?

​Orange County associate Jared Greenberg is the author of "Who controls Low-Altitude Airspace?" [PDF] published by The Daily Journal on May 4, 2017.

February 9, 2017 |
2016 Year-End Aerospace and Related Technologies Update

This February 2017 edition of Gibson Dunn's Aerospace and Related Technologies Update discusses newsworthy developments, trends, and key decisions from 2016 that are of interest to aerospace and defense, satellite, and drone companies, and new market entrants in the commercial space and related technology sectors, including the private equity and other financial institutions that support and enable their growth. Specifically, this update covers the following areas:  (1) commercial unmanned aircraft systems ("UAS"), or drones; (2) government contracts litigation involving companies in the aerospace and defense industry; and (3) the commercial space sector.  We discuss each of these areas in turn below.

I.  COMMERCIAL UNMANNED AIRCRAFT SYSTEMS

Unmanned aircraft systems ("UAS") technology has improved rapidly while becoming reasonably affordable for most organizations.  The commercial applications of UAS, more commonly referred to as "drones," include sensory data collection, building inspections, utility inspections, agriculture monitoring and treatment, railway inspections, pipeline inspections, mapping of mines, and photography.  New applications are being created on a regular basis. For years, the law prohibited commercial drone operations absent a special exemption.  However, in 2016, a comprehensive set of regulations governing non-recreational drone operations was finalized, thus creating sweeping opportunities to implement commercial drone operations. In 2016, many organizations incorporated drones into their operations and tested future concepts.  The drone delivery concept was validated through multiple corporate deliveries:  Amazon Prime Air made its first delivery in the United Kingdom; DHL delivered packages to a mountain plateau in Germany; Google and Chipotle tested burrito deliveries at Virginia Tech; and 7-Eleven and Flirtey delivered products in Reno, Nevada.  Disney World, in collaboration with Intel, revealed a new holiday show consisting of drones performing in the night sky, rather than traditional fireworks.  Walmart announced it would use drones to better track inventory at distribution centers.  And CNN became the first U.S. broadcaster to launch a drone division. Overall, 2016 was an historic year that officially ushered in a new industry.  We expect that the industry will continue to develop in the coming year, and that key topics such as rules governing flights over non-participating people, litigation concerning property owners' rights to airspace, privacy, and operations beyond visual line of sight will be addressed.  Related jurisdictional disputes are likewise on the horizon. Expanded drone operations also created controversy.  Citizens and police shot down drones on several occasions, news organizations reported collisions between drones and commercial aircraft (all stories were proven false after investigations), and concerns about privacy continued to build. To get you caught up on 2016's groundbreaking drone developments, below we have briefly summarized:  (A) Part 107 drone regulations; (B) the likely Proposed Rule for Operations Over Non-Participating People; (C) Privacy; and (D) the Intersection of Federal and State/Local Drone Laws.

A.  Part 107 – Drone Regulations

On August 29, 2016, the long-awaited comprehensive regulations for Small Unmanned Aircraft Systems ("sUAS"), drones weighing 55 pounds or less, became law under Part 107 of Title 14 of the Code of Federal Regulations ("Part 107").[1]  These regulations are monumental for commercial drone operations because they provide the regulatory foundation for the burgeoning industry.  Prior to Part 107, the law prohibited commercial drone operations unless an operator obtained a Section 333 exemption from the Federal Aviation Administration ("FAA").  Part 107 permits commercial operations within certain parameters and eliminates the need for an exemption, unless one wants to operate outside of those parameters. Significantly, Part 107 removed the time-consuming and expensive Section 333 requirement that commercial drone operators obtain a recreational or sport pilot license.  Under the new regulations, commercial drone pilots must obtain the newly created remote pilot certificate with a sUAS rating or be under the direct supervision of a person with a certificate.  To obtain the certificate, a person must pass an aeronautical knowledge test at an FAA-approved center, be vetted by the Transportation Security Administration, be able to speak English, and be at least 16 years old.  Individuals with an existing pilot license need only take an online sUAS training course to obtain a remote pilot certificate.[2]  In 2016, the FAA issued over 14,000 remote pilot certificates. In addition, Part 107 set forth several key operational limits for commercial drones[3]:
  1. maximum weight is 55 pounds;
  2. maximum groundspeed is 100 mph (87 knots);
  3. maximum altitude is 400 feet above ground level or within 400 feet of a structure;
  4. flights must be within daylight hours or civil twilight if the drone utilizes anti-collision lighting;
  5. drones must remain within visual line of sight of the remote pilot or an optional visual observer;
  6. minimum flight visibility must be no less than three statute miles;
  7. minimum distance from clouds must be no less than 500 feet below the cloud and 2000 feet horizontally from the cloud;
  8. drones may not operate over persons not directly participating in the operation;
  9. drones must yield the right of way to other aircraft;
  10. remote pilots cannot operate drones from a moving vehicle unless the flight is over a sparsely populated area; and
  11. remote pilots cannot operate more than one drone at a time (i.e., no swarming).

              1.  Part 107 Waivers

The FAA's willingness to provide waivers is one of the most promising aspects of Part 107 and will allow regulations to expand as technology progresses.  The waivers permit remote pilots to deviate from the following operational limits:[4]
  • operations from a moving vehicle;
  • daylight operations;
  • operations beyond a pilot's visual line of sight;
  • visual observer requirements;
  • operations of multiple drones;
  • yielding the right of way;
  • operations over people;
  • operating limitations; and
  • operations in certain airspace.
Applications for a Certificate of Waiver are completed online and granted on a case-by-case basis.  In 2016, the FAA granted 239 waivers.[5]  The majority of these waivers were for nighttime operations.  Notably, the following organizations received waivers:
  • CNN received a waiver for operations over people;
  • Precision Hawk and BNSF Railway Company received waivers allowing operations beyond visual line of sight; and
  • Project Wing, Intel Corporation, and Walt Disney Parks and Resorts received waivers for the operation of multiple drones.
If an organization needs an exemption from a particular section in Part 107 that is not subject to a waiver, it can request a Section 333 exemption or apply for a type certification.  This will be particularly relevant for operators wishing to fly drones greater than 55 pounds because Part 107 only applies to drones weighing 55 pounds or less.

              2.  Airspace Authorization 

In addition to applying for waivers, operators can now seek airspace authorization for operations in restricted airspace.  However, obtaining airspace authorization has been a source of frustration for many operators.  Part 107 allows operations "in Class B, Class C, or Class D airspace or within the lateral boundaries of the surface area of Class E airspace" if the remote pilot obtains "prior authorization from Air Traffic Control."[6]  But an FAA guidance letter from October 3, 2016, restricted Air Traffic Control from granting such authorization, stating that FAA headquarters will approve airspace waivers and coordinate with the relevant air traffic facility.[7]  The FAA UAS website's authorization portal requires that applications be submitted at least 90 days prior to the operation, which can seriously hinder timely operations.

*      *      *

Although the waiver and airspace authorization process is far from perfect, the mere existence of an institutionalized waiver and airspace authorization program is promising.  We expect that the FAA will streamline the process in 2017, making waivers and airspace authorization more accessible to remote pilots. We also expect that Part 107 is the beginning, and not the end, of drone regulations.  For example, in the next few years, the FAA will likely propose rules for drones heavier than 55 pounds, and within the next few months, the FAA will likely publish a Notice of Proposed Rule Making for operating drones over non-participating people.

B.  Proposed Rule for Operations Over Non-Participating People is Expected in 2017

In February 2016, the FAA assembled an aviation rulemaking committee ("ARC") to recommend standards that would allow certain drones to be operated over people.  The ARC submitted its recommendations on April 1, 2016, dividing drones into four categories based on the level of risk correlated to a weight or impact energy equivalent.[8] The FAA's Notice of Proposed Rulemaking ("NPRM") is expected to significantly vary from the ARC's recommendations.  The FAA sent the proposed rule to the White House Office of Information and Regulatory Affairs ("OIRA") in November 2016.  Once OIRA approves the proposed rule, the NPRM will be published in the Federal Register and a public comment period will begin.  As with the NPRM for Part 107, there likely will be thousands of public comments concerning the proposed rule.  Timing for publishing the NPRM is uncertain.  On January 20, 2017, President Trump issued a memorandum to all executive departments and agencies freezing new or pending regulations for 60 days. The proposed rules have the potential to remove a tremendous obstacle for certain drone operators.  Under Part 107, drones are prohibited from flying over unsheltered people unless they are "[d]irectly participating in the operation."[9]  Individuals "[d]irectly participating" include the remote pilot, the person on the controls, a visual observer, and anyone else essential to the operation.  Those who have merely given consent for the operations are excluded.[10] Therefore, under Part 107, implementing certain commercial drone operations may be a challenge, or impossible, due to the presence of non-participating people in the operational area.  For example, drone operations cannot take place over active construction or mining sites without first clearing the area of people, and news organizations may be prohibited from flying directly over a newsworthy event.  Part 107 does provide waivers for flights over non-participants on a case-by-case basis, but the waiver process is not always a practical option for addressing time-sensitive commercial needs.  The upcoming proposed rule will create standards for safe flights over non-participating people and should be a catalyst for many commercial operations.  Flights over non-participating people will likely increase privacy concerns.

C.  Privacy--Voluntary Best Practices

As the popularity of both commercial and hobbyist drones increases, concerns over privacy and personal data collection continue to swell.  In February 2015, President Obama issued a Presidential Memorandum directing that privacy, civil rights, and civil liberties concerns be taken into account as drones are integrated into the national airspace.[11]  Obama ordered the National Telecommunications and Information Administration ("NTIA") of the U.S. Department of Commerce to create a private-sector engagement process to help develop voluntary best practices for privacy, accountability, and transparency issues regarding commercial and private drone use.  That process took place over the past year, with the participation of multiple private-sector groups.  On May 19, 2016, the NTIA released voluntary best privacy practices for drones.[12]  The voluntary best practices received agreement from technology companies, insurance companies, media organizations, drone industry associations, and privacy groups.  Although these best practices do not create any legal standards, they set useful guidelines for any organization conducting drone operations. Many of the recommended best practices take into account the size and complexity of the operator (e.g., a large public company is expected to have a more comprehensive privacy policy with respect to its use of drones than an individual real estate photographer).  Moreover, newsgathering organizations, to which strong First Amendment protections apply, are expressly excluded.  The following summarizes the recommended best practices:

Covered Data:  The best practices focus heavily on the collection and storage of "covered data."  Covered data is information collected by drones that identifies a particular person.  If the data is unlikely to be linked to a particular person, or if it is altered so that a particular person is not recognizable, it is not considered covered data.

Privacy Policy:  Organizations collecting covered data should make reasonable efforts to inform individuals directly impacted by those organizations' use of drones, and they should maintain a publicly available privacy policy appropriate to their size.  The policy should identify:

  • the kind of covered data the drone operations will collect;
  • the purpose for which the data is collected;
  • retention and de-identification practices;
  • the types of entities with whom the data will be shared;
  • information on how to submit a privacy or security complaint; and
  • the organization's practices with respect to responding to law enforcement requests for data.

Reasonable Expectation of Privacy:  Absent a compelling need, drone operators should avoid collecting covered data when the subject has a reasonable expectation of privacy.  Operators should avoid intentional, persistent, and continuous collection of covered data about individuals.  Further, operators should make reasonable efforts to minimize flights over private property without consent of the owner or without appropriate legal authority.

Data Sharing and Use Limits:  Drone operators should only use covered data for those purposes identified in their privacy policy.  Without consent, the data should not be shared for marketing purposes or publicly disclosed without reasonable efforts to obfuscate (e.g., blur) the data.  Further, without consent, operators should not use covered data for employment eligibility, promotion or retention, credit eligibility, or healthcare treatment eligibility, unless expressly permitted by a sector-specific regulatory framework.

Data Storage:  Covered data should not be stored longer than necessary for the purposes for which it was collected (as disclosed to the public in a privacy policy).  Further, organizations should develop easily accessible processes to receive privacy or security complaints about the organization's use of drones.  These processes should include mechanisms by which individuals can request that an organization delete, de-identify, or otherwise obfuscate a person's covered data.

Data Security:  Organizations storing covered data should implement a program to address and manage cybersecurity risks.  The program should have reasonable administrative, technical, and physical safeguards appropriate to the organization's size and the nature of the covered data.  Appropriate safeguards include those described in guidance from the Federal Trade Commission, the National Institute of Standards and Technology Cybersecurity Framework, and the International Organization for Standardization's 27001 standard for information security management.  Corporations should consider the below practices to secure covered data:

  • establish a written security policy detailing the collection, use, storage, and dissemination of covered data;
  • regularly monitor systems for breach and data security risks;
  • provide security training to employees with access to covered data; and
  • limit access to covered data.
Part 107 does not address privacy.  In the NPRM for Part 107, the FAA stated that privacy issues were "beyond the scope" of the rule, and "that state law and other legal protections for individual privacy may provide recourse for a person whose privacy may be affected through another person's use of a UAS."[13]  During the comment period for the NPRM, the FAA received around 180 comments regarding privacy concerns, but declined to include privacy regulations within Part 107.[14]

            1.  Litigation Regarding Whether the FAA Needs to Address Privacy

The Electronic Privacy Information Center ("EPIC") challenged the FAA's decision to exclude privacy regulations from Part 107 by filing a petition for review in August 2016.[15]  EPIC had previously sought review of the NPRM because it excluded privacy regulations, but in May 2016, the D.C. Circuit held that EPIC's challenge was premature because the proposed rule was not final.[16]  After the rule became final, EPIC filed a new petition of review asking the court to vacate Part 107 and remand it to the FAA for further proceedings.[17]  EPIC contends that the FAA Modernization and Reform Act of 2012 requires the FAA to address privacy concerns related to drones, while the FAA asserts that privacy is beyond its charge to regulate aviation safety in the national airspace.  All eyes will be on the D.C. Circuit to determine if the FAA will be required to issue rules related to privacy. Regardless of whether or not there are federal rules directed towards drone privacy, corporations should make their best efforts to comply with the NTIA Voluntary Best Practices, as well as state and local privacy laws.

D.  Uncertainty Clouds the Intersection of Federal and State/Local Drone Laws

Although Part 107 created a federal regulatory framework for commercial drone operations, there is still significant confusion as to what constitutes a legal flight under evolving state and local laws.  Laws regulating the drone industry exist in 32 states, and five states have adopted resolutions regarding drones.[18]  In 2016, at least 38 state legislatures considered legislation to regulate the drone industry, and 17 states (Alaska, Arizona, California, Delaware, Idaho, Illinois, Indiana, Kansas, Louisiana, Oklahoma, Oregon, Rhode Island, Tennessee, Utah, Vermont, Virginia and Wisconsin) passed 31 pieces of legislation.[19]  In addition, countless local governments proposed and passed ordinances impacting the drone industry at the local level.  Thus, it will be critical for companies launching commercial drone enterprises to work closely with counsel to determine which, if any, state and local laws apply to each commercial operation.  They will also need to evaluate preemption issues. In the developing drone community, confusion stems from the FAA's position that it controls the airspace "from the ground up," and that the notion that it does not control airspace below 400 feet is a "myth."[20]  However, many state and local governments do not agree with the FAA's interpretation.  There are major implications for where navigable airspace begins, and the question ultimately will be settled by federal courts over the next several years.  This is one of the most important legal issues for the industry because, without clarification, legal compliance and enforcement may be impossible within some localities. While the FAA governs the "navigable airspace" of the United States,[21]  navigable airspace is defined as the "airspace above the minimum altitudes of flight prescribed by regulations . . . including airspace needed to ensure safety in the takeoff and landing of aircraft."[22]  The FAA regulations list the minimum safe altitude as 500 feet above the surface in non-congested areas (lower in sparsely populated areas) and 1,000 feet above the highest obstacle in congested areas.[23]  Although aircraft can fly below these minimum safe altitudes for takeoff or landing, when these laws and regulations were created, the very concept of low-flying, low-price drones--which can take off and land on anyone's property--only existed in science fiction.  The proliferation of drones requires clarification of where private property rights end and navigable airspace begins. The Supreme Court provided some guidance on property rights and navigable airspace in 1946 in United States v. Causby.[24]  In Causby, a chicken farm was located near an airport, and the glide path for one of the runways was 83 feet above the property.  The Court examined whether military aircraft flying 83 feet above the property was a taking.  The Court held that it was a taking and stated:  "[I]t is obvious that if the landowner is to have full enjoyment of the land, he must have exclusive control of the immediate reaches of the enveloping atmosphere.  Otherwise buildings could not be erected, trees could not be planted, and even fences could not be run."[25]  The court also acknowledged that an invasion of air above one's property can be in the "same category as invasions of the surface."[26]  The Court declined to determine the exact boundary between one's property and public airspace:  "We need not determine at this time what those precise limits are."[27]  Even if the Court did determine precise limits, a military aircraft landing at an airport in 1946 is fundamentally different from today's low-flying, low-price, consumer and commercial drones. In 2016, two pending lawsuits began to address the key question of defining navigable airspace in the context of drones.                    Boggs v. Merideth, No. 3:16-cv-00006 (W.D. Ky. Jan. 4, 2016) In Boggs v. Merideth (also known as the "Drone Slayer" case), a drone operator in the Western District of Kentucky filed a lawsuit against a landowner (the self-proclaimed "Drone Slayer") who downed the plaintiff's drone with a shotgun.[28]  The drone was flying around 200 feet above the Defendant's property, and the defendant claimed it was trespassing and invading his privacy.  After a state judge found the defendant was "within his rights," the plaintiff filed a complaint in federal court for declaratory judgement to "define clearly the rights of aircraft operators and property owners."[29]  The district court has not yet ruled on the issue.                    Huerta v. Haughwout, No. 3:16-cv-358, Dkt. No. 30 (D. Conn. Jul. 18, 2016) The most notable case of 2016 regarding the FAA's authority over low-level airspace was Huerta v. Haughwout (also known as the "flamethrower drone" case).  The Haughwouts posted YouTube videos of a drone flying a few feet above their property.  In one video, a drone fired an attached handgun, and in another video, a drone roasted a turkey with an attached flamethrower.  The FAA sent the Haughwouts an administrative subpoena to acquire more information about these activities.  The Haughwouts declined to comply with the subpoenas and claimed their activities were not subject to investigation by the FAA.  The FAA sought enforcement of the subpoenas.  The District Court for the District of Connecticut found the administrative subpoenas to be valid and ordered the Haughwouts to comply.[30] In his order, Judge Jeffrey Meyer included dicta that casts doubt on the FAA's claim to controlling airspace from the ground up:  "the FAA believes it has regulatory sovereignty over every cubic inch of outdoor air in the United States . . . [T]hat ambition may be difficult to reconcile with the terms of the FAA's statute that refer to 'navigable airspace.'"  The dicta addressed the question of where the FAA's authority begins, but noted that the "case does not yet require an answer to that question."[31]  Notably, the Judge stated:

Congress surely understands that state and local authorities are (usually) well positioned to regulate what people do in their own backyards.  The Constitution creates a limited national government in recognition of the traditional police power of state and local government.  No clause in the Constitution vests the federal government with a general police power over all of the air or all objects that leave the ground.  Although the Commerce Clause allows for broad federal authority over interstate and foreign commerce, it is far from clear that Congress intends--or could constitutionally intend--to regulate all that is airborne on one's own property and that poses no plausible threat to or substantial effect on air transport or interstate commerce in general.[32]

The dicta in Huerta may indicate how federal courts will address this vital issue.  As drone operations continue to expand, the importance of the question will continue to grow.

E.  Looking Ahead

2017 will be an important year for the development of the commercial drone industry.  We can expect to see more organizations adopting drone operations; the FAA streamlining Part 107 waivers and airspace authorization; a proposed rule governing flights over non-participating people; litigation regarding property owners' rights to airspace; more dialogue regarding privacy issues; and significant progress in operations beyond-the-visual-line-of-sight ("BVLOS"), given the approval obtained by the Northern Plains UAS Test Site for conducting BVLOS flights in 2017.  This approval will allow companies to develop, test, and evaluate BVLOS concepts and platforms without the need for a Part 107 waiver.  Progress in BVLOS operations combined with the upcoming proposed rule for flights over non-participating people will greatly expand commercial applications. In addition, the Trump administration's approach to commercial drones, and any judicial decisions regarding federal preemption and privacy, will shape the future of this burgeoning industry.

II.  GOVERNMENT CONTRACTS LITIGATION IN THE AEROSPACE AND DEFENSE INDUSTRY

Gibson Dunn's 2016 Year-End Government Contracts Litigation Update and 2016 Mid-Year Government Contracts Litigation Update cover the waterfront of the most important opinions issued by the U.S. Court of Appeals for the Federal Circuit, U.S. Court of Federal Claims, Armed Services Board of Contract Appeals ("ASBCA"), and Civilian Board of Contract Appeals ("CBCA"), among other tribunals.  We invite you to review those publications for a full report on case law developments in the government contracts arena. In this update, we summarize key court decisions related to government contracting from 2016 that involve players in the aerospace and defense industry.  The cases discussed herein, and in the Government Contracts Litigation Updates referenced above, address a wide range of issues with which government contractors in the aerospace and defense industry are likely familiar, including issues of contract interpretation, jurisdictional requirements, limitations on the remedies available to contractors, and the various topics of federal common law that have developed in the government contracts tribunals.  In addition, we highlight the uncertainty surrounding the direction federal contracting policy will take under the new Trump administration.

A.  Select Decisions of Interest to Government Contractors in the Aerospace and Defense Industry

            1.  Jurisdictional Issues (Defining the Claim)

Whether the courts and boards of contract appeals have jurisdiction over a matter turns on whether there is a valid "claim" and, relatedly, how that claim is defined.  Because the Contract Disputes Act, 41 U.S.C. §§ 7101‒7109 ("CDA") does not define the term "claim," the courts and boards of contract appeals look to the definition set forth in the Federal Acquisition Regulation ("FAR").  FAR 33.201 defines a "claim" as "a written demand or written assertion by one of the contracting parties seeking, as a matter of right, the payment of money in a sum certain, the adjustment or interpretation of contract terms, or other relief arising under or relating to this contract." In 2016, two decisions from the ASBCA that involved the aerospace and defense industry touched on jurisdictional issues.  In Military Aircraft Parts, ASBCA No. 60290 (Feb. 4, 2016), the ASBCA addressed whether a contractor's claims could "merge" into or be precluded by related claims that would otherwise not be within the board's jurisdiction.  In Alaska Aerospace Corp., ASBCA No. 59794 (Sept. 13, 2016), the ASBCA considered whether the contractor had submitted a claim as required by the CDA.                    Military Aircraft Parts, ASBCA No. 60290 (Feb. 4, 2016) Between 2009 and 2011, the Government issued three orders for parts for the C-130 aircraft from Military Aircraft Parts ("MAP").  MAP shipped two units under the first order for first-article testing, but the Government asserted that the parts had failed the "form, fit, and function" test, and subsequently issued a unilateral modification canceling the order.  The Government thereafter unilaterally canceled the second order, and the parties bilaterally canceled the third.  MAP submitted a claim for breach of contract, which was denied by the contracting officer.  The contracting officer admitted that the unilateral cancellation of the first order was improper, but converted the cancellation to a termination for convenience and denied relief for all three orders.  After MAP appealed, the Government moved to dismiss, arguing that MAP could not appeal before responding to the Government's termination for convenience with a termination settlement proposal pursuant to FAR part 49. The board (O'Sullivan, A.J.) found that MAP was not required to make a termination settlement proposal prior to appealing the denial of its breach claim.  Relying upon the Federal Circuit's decision in James M. Ellett Construction Co. v. United States, 93 F.3d 1537 (1996), Judge O'Sullivan held that "a contractor is not precluded by a pending termination settlement proposal from pursuing contract claims independent of that proposal."  Because the Government's termination for convenience came later than its unilateral cancellation, the board reasoned, the relief available to MAP for a breach claim could be considerably different from the relief available for a claim arising from the termination for convenience.  (At the very least, MAP could have been eligible for interest on its breach claim.)  Therefore, MAP's breach claim did not "merge" into the government's termination for convenience, and the board denied the Government's motion to dismiss for lack of jurisdiction.                    Alaska Aerospace Corp., ASBCA No. 59794 (Sept. 13, 2016) In 2003, the Missile Defense Agency awarded a contract to Alaska Aerospace for the use of a launch complex and support services.  The contract incorporated, by reference, FAR 52.216-7, Allowable Cost And Payment (Dec. 2002), which allows reimbursement of contributions to employee pension plans.  In 2014, the Government partially disallowed costs for employee pension plans and sought to recover the disallowed costs. The Board (Melnick, A.J.) first noted that because the Government was seeking to recoup money, the case was a Government claim for which the Government bore the burden of proof.  In finding that the Government failed to meet its burden, the Board explained that the Government's reliance on the contracting officer's final decision as evidence of overpayment was improper.  The contracting officer's final decision attempted to impose a penalty, not establish recoupment as a basis for the demand for payment.  Further, findings of fact in the contracting officer's final decision are not binding upon the parties and are not entitled to any deference.

            2.  Jurisdictional Issues (Timeliness of Appeals at the Board of Contract Appeals)

A host of recent cases addressed the CDA's jurisdictional requirement to timely file an appeal after receipt of a contracting officer's final decision.  Two such cases involve aerospace and defense companies and are discussed below.  Under the CDA, a board has jurisdiction over appeals taken within 90 days of receiving the contracting officer's final decision; whereas, there is a one-year statutory clock applicable to appeals filed in the Court of Federal Claims. In a pair of appeals before the ASCBA, Military Aircraft Parts attempted--unsuccessfully--to argue that the Federal Circuit's ruling that the CDA's six-year statute of limitations period is not jurisdictional, Sikorsky Aircraft Corp. v. United States, 773 F.3d 1315 (Fed. Cir. 2014), should give the board discretion to waive the 90-day appeal period.  Although the two cases were decided differently on the merits, the ASBCA made clear, in both instances, that it would not interpret Sikorsky to allow a waiver of the appeal period.                    Military Aircraft Parts, ASBCA No. 60336 (Apr. 25, 2016); and Military Aircraft Parts, ASBCA No. 60139 (June 3, 2016) In the first case, Military Aircraft Parts appealed the termination for default of its contract to provide aircraft frames to the Defense Logistics Agency and the cancellation of two purchase orders for more frames, claiming that the termination and cancellation were breaches of the contract.  The board (McIlmail, A.J.) held that it could not review the appeal from the termination of the original contract because it was not brought within 90 days after the termination decision.  Although the contractor urged the board to adopt a "good cause" exception to the 90-day deadline in light of the Federal Circuit's ruling that the CDA's statute of limitations is not jurisdictional, Judge McIlmail reiterated that the 90-day appeals period cannot be waived. In the second case, Military Aircraft Parts appealed the contracting officer's final decisions that denied a number claims for breach of contract arising out of a contract that the Government terminated for default.  The Government argued that Military Aircraft Parts did not timely appeal the default terminations and was using its breach of contract claims on appeal to the board in an attempt to skirt the CDA's 90-day jurisdictional deadline for appeal of the contracting officer's final decision on the default termination.  Military Aircraft Parts denied the assertion that its complaint was merely a challenge to default terminations "clothed in breach of contract language" and, in the alternative, argued again that the reasoning in Sikorsky should allow the board to find that the 90-day appeal period is not jurisdictional.  The board (O'Sullivan, A.J.) agreed with the Government, finding that the board lacked jurisdiction over the claims because they were implicit challenges to the default termination.  In doing so, Judge O'Sullivan cited pre-Sikorsky precedent to reaffirm its long line of precedent holding that the 90-day deadline is "jurisdictional, absolute, and may not be waived."

            3.  Contract Interpretation

The following decision from the second half of 2016 articulates broadly applicable contract interpretation principles that government contractors should consider.                    King Aerospace, Inc., ASBCA No. 57057 (July 26, 2016) In 2005, the Government awarded a contract to King for the maintenance of a fleet of aircraft.  In 2009, King presented a certified claim incorporating a Request for an Equitable Adjustment ("REA") based on additional maintenance required as a result of aircraft conditions inferior to those represented in the contract.  The contracting officer denied the claim and King appealed. The Board (McImail, A.J.) concluded that King was entitled to additional compensation, noting that in order to prevail on a claim of misrepresentation, the contractor needed to show that there was a false representation of material fact that the contractor reasonably relied on to the contractor's detriment.  The Board determined that the contract represented that aircraft would be maintained in accordance with industry practices, and that the aircraft were not maintained in such a fashion.  Further, this misrepresentation was material because the condition of the aircraft was likely to affect the inducement of King in assenting to maintaining the aircraft.  Moreover, King honestly relied on the misrepresentation to its detriment because King would have bid higher had it known of the substandard condition of the aircraft.  The Board also found that King's reliance was reasonable as there was no contrary representation of the aircrafts' conditions. 

            4.  Cost Issues

                   Raytheon Co., Space & Airborne Sys., ASBCA No. 58068 (Aug. 9, 2016) In 2007, Raytheon SAS revised its cost accounting practices, one of which the Defense Contract Audit Agency ("DCAA") determined to result in a $142,000 increase to the Government across all contracts with the business.  DCAA did not consider decreased costs to the Government from one of the related changes, which more than offset the modest increase from the first change, due to a revision to FAR 30.606 in 2005, that prohibits such offsets, as discussed in an earlier decision in this case covered in the 2015 Mid-Year Government Contracts Litigation Update .  The contracting officer subsequently issued a final decision on the alleged increased costs and Raytheon SAS appealed. The Board (O'Connell, A.J.) sustained the appeal, ruling for Raytheon SAS, because it found that the contracting officer improperly determined the amount at issue was "material" based solely upon the dollar value of the increased cost, without considering other required factors, such as the magnitude of the dollar value in relation to Raytheon SAS's total contracting relationship with the Government (here, less than 0.005%), the cost impact per contract (here, $36 per contract, per year), or the benefit of reduced administrative processing costs by the Government.  The Board concluded that the contracting officer's failure to consider these factors was an "abuse of discretion," which is significant because there was no evidence of bad faith by the contracting officer.                    Exelis, Inc., ASBCA No. 60131 (Aug. 29, 2016) Exelis appealed from a contracting officer's final decision finding that Exelis improperly accounted for the costs of a building lease pursuant to Cost Accounting Standard ("CAS") 404, which governs Capitalization of Tangible Assets.  Exelis moved to dismiss and asserted that there was no CAS 404 violation, and that while the CAS 404 claim asserted a sum certain, it did not assert a sum certain with regard to a FAR violation, which the Government was also asserting. The Board (D'Alessandris, A.J.) determined that there was no CAS 404 violation.  First, the Board found the plain language of CAS 404 to be clear, that it applied to "tangible" assets, and that a building lease is an "intangible" asset since it does not have "physical substance."  Second, even if the language was not clear, the preamble to CAS 404 showed that the CAS Board did not intend that all leases should be "tangible capital assets."  Third, in considering other interpretive aids, the Board continued to find that the Government could not establish a CAS 404 violation. Regarding the alleged FAR violation, the Board first noted that new theories or new damages that arise from the same operative facts do not constitute new claims, and that the sum certain requirement simply requires a specified dollar amount for a claim.  The Board also explained that estimated or approximate costs in determining the value of a claim is sufficient, as long as the overall demand is for a sum certain.  In light of this, the Board found that the relevant facts in the appeal included the lease in question, and that the FAR and CAS claims involved the same operative facts and were the same claim for CDA purposes.  Thus, despite the Government's sum certain being calculated based on a purported CAS violation rather than a FAR violation, the claim was still proper because the two purported violations were the same for CDA purposes.

B.  Uncertainty in the Direction that Federal Contracting Policy Will Take Under the New Trump Administration

The direction that federal contracting policy will take under the new Trump administration remains somewhat vague, and we will continue to keep you informed as the administration's policy develops.  But we note that President Trump's willingness to use Twitter to address the price of federal contracts will likely have implications in the industry.  Although prior administrations have been critical about allegedly wasteful spending, President Trump's Twitter activity suggests that the President is willing to directly intervene in the negotiation and execution of government contracts, which is something federal contractors will have to take into account.

III.  COMMERCIAL SPACE SECTOR

A.  Developments in the Commercial Crew Program

The National Aeronautics and Space Administration ("NASA") has lacked the domestic capability to transport astronauts to space since the expiration of the Space Shuttle Program in July 2011.  Since then, NASA has relied upon the Russian Federal Space Agency ("Roscosmos") to ferry astronauts to the International Space Station ("ISS"), at prices ranging from $21 million to $82 million per roundtrip.  To remedy this situation, NASA instituted the Commercial Crew Program to work with commercial companies to develop manned spaceflight systems.  In September 2014, NASA selected two companies to participate in this program:  The Boeing Company ("Boeing") and Space Exploration Technologies Corporation ("SpaceX"). On September 1, 2016, NASA announced that both companies were facing technical challenges that would delay the first flights carrying NASA astronauts to the ISS until late 2018--more than three years after NASA's original 2015 goal.[33]  Boeing was experiencing issues related to vehicle mass and the effects of vibrations generated during launch.  SpaceX was experiencing delays from its decision to change its capsule design to enable water-based landings.  In light of these developments, NASA extended its contract with Roscosmos for astronaut transportation through 2018, at an additional cost of $490 million for six more seats. On January 4, 2017, NASA announced that it awarded additional space missions to Boeing and SpaceX.[34]  Originally, each firm was offered two roundtrip missions to the ISS.  Now each firm will launch six missions.  Boeing has scheduled an unmanned flight test for June 2018 and a crewed flight test for August 2018.  It has even released new spacesuit designs.[35]  SpaceX has scheduled an unmanned flight test for November 2017 and a crewed flight test for May 2018.

B.  NOAA Policies on Commercial Activity

The National Oceanic and Atmospheric Administration ("NOAA") released a commercial space policy on January 8, 2016.[36]  Among other things, it designated the Office of Space Commerce as a point of contact for commercial providers to promote more efficient commercial engagement.  The policy was part of NOAA's efforts to understand better how partnerships with private firms in the rapidly changing commercial space sector could help the agency perform its functions.[37] NOAA's National Environmental Satellite, Data, and Information Service ("NESDIS") published a Commercial Space Activities Assessment Process on January 6, 2017.[38]  This report indicated NOAA's interest in commercially provided data satisfying its technical requirements at a lower cost than government alternatives.  It then set out a four-part process for future government contracts.  First, NESDIS will release one or more Requests for Information to convey its interest in new data sets and gather information about new, emerging, and existing commercial observation capabilities.  Based on these responses, NESDIS will then release one or more solicitations to acquire and evaluate commercial data satisfying the requisite specifications.  NOAA may then purchase data from one or more vendors for analysis and evaluations through a demonstration project.  Following these demonstrations, NESDIS may issue one or more solicitations to purchase on-orbit observations from commercial sources for operational use by NOAA. On September 15, 2016, NOAA announced that it awarded contracts to GeoOptics, Inc. ($695,000), and Spire Global, Inc. ($370,000), as part of its Commercial Weather Data Pilot.[39]  The firms will provide space-based GNSS radio occultation data to NOAA for the agency to evaluate.  They have until April 30, 2017, to complete the delivery of their data.  NESDIS will conduct an assessment of the data through the end of FY 2017 and produce a final report in early FY 2018.

C.  For the First Time, Federal Agencies Authorize Private Company to Land on Moon

On July 20, 2016, the Federal Aviation Administration approved a private company's plans to land a robotic lander on the Moon, capping a series of unprecedented regulatory approvals from NASA and the State Department that blaze a trail for commercial lunar expeditions.[40]  The company, Moon Express, is an early-stage startup founded for the purpose of establishing commercial travel to, and gathering resources and metals from, the Moon.[41] As previously there was "no existing regulatory framework for private missions beyond Earth orbit," Moon Express CEO Bob Richards says that "Moon Express created a proposed framework" for the necessary approvals.[42]  While more details have yet to emerge about Moon Express's framework, it purportedly focused on "the safety of its payload as well as outlining [how] the United Nation's Outer Space Treaty would not be violated."[43]  The framework uses "existing payload review and launch license processes under authorities of the Secretary of Transportation, and adds to them a series of voluntary disclosures intended to provide the Federal Government with sufficient information to help fulfill its supervisory obligations under the Outer Space Treaty."[44] The approval is for a lunar mission in 2017, but Moon Express is still assembling its lander and coordinating for its rocket with Los Angeles-based "Rocket Lab."[45]  If Moon Express reaches the Moon by December 31, 2017, it may win the "Google Lunar X Prize competition for the first private organization to reach the moon" and also reap a $20 million reward.[46]  Four others teams from around the world purportedly have obtained 2017 launch contracts from their respective governments.[47]  Moon Express recently announced it has raised an additional $20M in series B-1 funding, which it claims "fully finance[s]" its 2017 launch.[48]

D.  Congress Passes Law Expanding Federal Aviation Administration and Secretary of Transportation Authority to Consider Proposed Construction's Impacts on Space Operations

On November 28, 2016, President Obama signed into law H.R. 6007,[49] a bill "[t]o amend title 49, United States Code, to include consideration of certain impacts on commercial space launch and reentry activities in a navigable airspace analysis, and for other purposes."  The bill amended 49 U.S.C. § 44718, which has long permitted the Secretary of Transportation to conduct studies and issue reports on any adverse impact on navigable airspace resulting from proposed construction.  H.R. 6007 required the Secretary of Transportation to conduct an aeronautical study if the Secretary determines that any proposed construction or alteration would interfere with "air or space navigation facilities."[50]  And in conducting such a study, the bill required the Secretary to consider "the impact on launch and reentry for launch and reentry vehicles arriving or departing from a launch site or reentry site licensed by the Secretary."[51]  The bill's purview included "space ports established at existing airports," as airports are considered "General Aviation" facilities.[52]  By May 28, 2018, the FAA Administrator must "initiate a rulemaking to implement" the aforementioned amendments.[53] H.R. 6007 came on the heels of "officials at California's Mojave Air and Space Port criticiz[ing an] FAA decision to allow the construction of taller electric transmission lines near the airport."[54]  The bill's sponsor, California Representative Kevin McCarthy, said on the House floor that the bill gave "the FAA the authority they now lack to examine whether structures being built near spaceports will obstruct spaceflight."[55]  McCarthy's explicit intent was that the bill "ensures [] government policies keep up with the progress" of "commercial space flight."[56]  Both the House and Senate unanimously approved H.R. 6007.[57]

E.  FAA Rule on Reciprocal Waivers

In August 2016, the Federal Aviation Administration (FAA) revised its rule on reciprocal waivers of claims for commercial launches and reentries.  The new rule simplifies the procedure for customers who contract with a first-tier customer, as opposed to the licensee or permittee.  Under the rule, these customers enter into a waiver agreement with the first-tier customer, not the licensee or permittee.  The rule also mandates that all customers waive claims against every other customer regardless of whether those customers sign a different set of reciprocal waivers.[58]

F.  President Trump's Commercial Space Policy

The Trump administration has the potential to be the most supportive ever for the commercial space industry.  During the campaign, two of President Trump's advisors wrote in an op-ed that "government must recognize that space is no longer the province of governments alone."  The advisors mentioned the work of Boeing/ULA, Orbital ATK, Virgin Galactic, Blue Origin, Paragon, Sierra Nevada, and Xcor, and they praised SpaceX for its "Made in America policy."  They also promised to resurrect the National Space Council under Vice President Mike Pence to coordinate space policy.[59] Since winning the election, Trump has consulted several advocates of commercial spaceflight.  Elon Musk of SpaceX and Jeff Bezos of Blue Origin both attended a meeting with Trump in December, and Peter Thiel, an investor in SpaceX, has been named to the President's Strategic and Policy Forum.[60] But Senator Jeff Sessions, Trump's nominee for attorney general, supports a more traditional space policy.  Sessions, whose state is home to NASA's Marshall Space Flight Center, reportedly has been involved in choosing Trump's NASA landing team and a nominee for NASA administrator.[61] This division is reflected in the composition of Trump's NASA landing team.  After initially appointing a head of the team who appears to support a more traditional policy, the transition added several members who support commercial space exploration.[62] Trump has yet to nominate an administrator for NASA, but the early favorite is Congressman Jim Bridenstine, who has advocated for commercial space interests in Congress.  Other candidates reportedly include former NASA deputy administrator Shana Dale, former NASA administrator Mike Griffin, former NASA astronaut Eileen Collins, and Scott Pace of George Washington University.[63]

IV.  CONCLUSION

We will continue to keep you informed on these and other related issues as they develop.
   [1]   Operation and Certification of Small Unmanned Aircraft Systems, 81 Fed. Reg. 42064 (June 28, 2016).    [2]   14 C.F.R §§ 107.12, 107.53–107.79 (2016).    [3]   Id. §§ 107.3, 107.25, 107.35, 107.51, 107.37, 107.39, 107.41 (2016).    [4]   Id. § 107.205 (2016).    [5]   See FAA, Part 107 Waivers Granted (Dec. 31, 2016), available at https://www.faa.gov/uas/ request_waiver/waivers_granted/.    [6]   14 C.F.R. § 107.41 (2016).    [7]   FAA Order JO 7200.23, Air Traffic Organization Policy (Oct. 3, 2016), available at https://www.faa.gov/documentLibrary/media/Order/FAA_JO_7200_23_2.pdf.    [8]   See FAA, Micro Unmanned Aircraft Systems ARC Recommendations Final Report (April 1, 2016), available at https://www.faa.gov/uas/resources/policy_library/media/Micro-UAS-ARC-FINAL-Report.pdf.    [9]   14 C.F.R. § 107.39 (2016). [10]   See 81 Fed. Reg. at 42128. [11]   The White House, Office of the Press Secretary, Presidential Memorandum:  Promoting Economic Competitiveness While Safeguarding Privacy, Civil Rights, and Civil Liberties in Domestic Use of Unmanned Aircraft Systems (Feb. 15, 2015), available at https://obamawhitehouse.archives.gov/the-press-office/2015/02/15/presidential-memorandum-promoting-economic-competitiveness-while-safegua. [12]   Voluntary Best Practices for UAS Privacy, Transparency, and Accountability, NTIA-Convened Multistakeholder Process (May 18, 2016), available at https://www.ntia.doc.gov/files/ntia/publications/uas_privacy_best_practices_6-21-16.pdf. [13]   Notice of Proposed Rule Making, Operation and Certification of Small Unmanned Aircraft Systems, 80 Fed. Reg. 9544, 9552 (Feb. 23, 2015). [14]   81 Fed. Reg. at 42190. [15]   EPIC v. FAA, No. 16-1297 (D.C. Cir. 2016). [16]   EPIC v. FAA, 821 F.3d 39, 43 (D.C. Cir. 2016). [17]   See EPIC v. FAA, No. 16-1297 (D.C. Cir. 2016). [18]   Id. [19]   Current Unmanned Aircraft State Law Landscape, National Conference of State Legislatures (Dec. 16, 2016), available at http://www.ncsl.org/research/transportation/current-unmanned-aircraft-state-law-landscape.aspx. [20]   FAA, Busting Myths About the FAA and Unmanned Aircraft (Mar. 7, 2014), available at https://www.faa.gov/news/updates/?newsId=76240. [21]   See 49 U.S.C. § 40103. [22]   Id. § 40102(32). [23]   14 C.F.R. § 91.119(b)(c). [24]   328 U.S. 256, 266 (1946). [25]   Id. at 264. [26]   Id. at 265. [27]   Id. at 266. [28]   See Boggs, No. 3:16-cv-00006, Dkt. No. 1 (W.D. Ky. Jan. 4, 2016). [29]   See id. [30]   See Huerta, No. 3:16-cv-358, Dkt. No. 30. [31]   Id. [32]   Id. [33]   NASA's Commercial Crew Program:  Update on Development and Certification Efforts, NASA, Office of Inspector General, Office of Audits (Sept. 1, 2016), available at https://oig.nasa.gov/docs/IG-16-028.pdf. [34]   Steven Siceloff, Mission Awards Secure Commercial Crew Transportation for Coming Years, NASA (Jan. 3, 2017), available at https://www.nasa.gov/feature/mission-awards-secure-commercial-crew-transportation-for-coming-years. [35]   Steven Siceloff, New Spacesuit Unveiled for Starliner Astronauts, NASA (Jan. 25, 2017), available at https://www.nasa.gov/feature/new-spacesuit-unveiled-for-starliner-astronauts. [36]   NOAA Commercial Space Policy, NOAA (Jan. 8, 2016), available at https://www.corporateservices.noaa.gov/ames/administrative_orders/chapter_217/Commercial%20Space%20Policy.pdf. [37]   NOAA Issues Commercial Space Policy, NOAA (Jan. 8, 2016), available at https://www.noaa.gov/media-release/noaa-issues-commercial-space-policyl. [38]   Commercial Space Activities Assessment Process, NOAA/NESDIS (Jan. 6, 2017), available at https://www.nesdis.noaa.gov/sites/default/files/asset/document/nesdis_commercial_space_activities_assessment_process_final%201.6.17%20readable.pdfSee also NESDIS Commercial Space Activities Assessment Process, Office of Space Commerce (Jan. 6, 2017), available at http://www.space.commerce.gov/business-with-noaa/nesdis-commercial-space-activities-assessment-process/. [39]   NOAA Awards Commercial Weather Data Pilot Contracts, Office of Space Commerce (Sept. 15, 2016), available at http://www.space.commerce.gov/noaa-awards-commercial-weather-data-pilot-contracts/. [40]   Jordan Rice, The First Private Spaceflight Company Is Cleared for a Moon Landing, Astronomy Magazine (Aug. 4, 2016), http://www.astronomy.com/news/2016/08/next-stop-the-moon.  Up until this point, private companies have flown only 22,236 miles above the Earth--Moon Express intends to send its lander ten times that distance.  See Kenneth Chang, Florida Company Gets Approval to Put Robotic Lander on Moon, The New York Times (Aug. 3, 2016), available at https://www.nytimes.com/2016/08/04/science/moon-express-faa.html?_r=0. [41]   Saki Knago and AJ Barbosa, The New Space Biz:  Companies Seek Cash in the Cosmos, The Huffington Post (July 22, 2011), http://www.huffingtonpost.com/2011/07/22/new-space-business_n_907358.html. [42]   Rice, supra note 40. [43]   Rice, supra note 40. [44]   US Government Approves Plan for Moon Express to Become First Private Company to Venture Beyond Earth's Orbit, Moon Express, http://www.moonexpress.com/news/us-government-approves-plan-moon-express-become-first-private-company-venture-beyond-earths-orbit/ (last visited Jan. 27, 2016). [45]   Chang, supra note 40. [46]   Chang, supra note 40. [47]   Homepage, Google Lunar XPrize, http://lunar.xprize.org/ (last visited Jan. 27, 2016). [48]   Sam Levin, Moon Express Raises $20m for 2017 Voyage to the Moon, The Guardian (Jan. 17, 2017, https://www.theguardian.com/science/2017/jan/17/moon-express-raises-20m-for-2017-voyage-to-moon; see also Emily Calandrelli, Moon Express Raises $20M in Series B-1, Fully Funds Trip to the Moon, TechCrunch (Jan. 13, 2017), https://techcrunch.com/2017/01/13/moon-express-raises-20-million-in-series-b-1-fully-funds-trip-to-the-moon/. [49]   H.R. Rep No. 6007 (2016), available at https://www.congress.gov/bill/114th-congress/house-bill/6007/text. [50]   49 U.S.C. § 44718(b)(1) (emphasis added). [51]   49 U.S.C. § 44718(b)(1)(F). [52]   Steven Mayer, Obama Signs McCarthy Bill to Protect Space Ports, Bakersfield.com (Nov. 29, 2016), http://www.bakersfield.com/news/obama-signs-mccarthy-bill-to-protect-space-ports/article_317b54d7-dffc-590d-b121-c7a8e6b3b32e.html. [53]   H.R. Rep No. 6007 (2016), available at https://www.congress.gov/bill/114th-congress/house-bill/6007/text. [54]   Id. [55]   Jeff Foust, House Advances Commercial Space and Astronaut Health Bills, SpaceNews (Sep. 22, 2016), http://spacenews.com/house-advances-commercial-space-and-astronaut-health-bills/#sthash.pqkTLvBT.dpuf. [56]   Mayer, supra note 52. [57]   Foust, supra note 55. [58]   Reciprocal Waivers of Claims for Licensed or Permitted Launch and Reentry Activities, 81 Fed. Reg. 55115 (2016) (codified at 14 C.F.R. § 440). [59]   Robert S. Walker & Peter Navarro, Op-ed:  Trump's Space Policy Reaches for Mars and the Stars, SpaceNews (Oct. 19, 2016), http://spacenews.com/trumps-space-policy-reaches-for-mars-and-the-stars/. [60]   Eric Berger, Peter Thiel Now Leading the Fight for Commercial Space in Trump's NASA, Ars Technica (Dec. 20, 2016, 6:31 PM), https://arstechnica.com/science/2016/12/peter-thiel-now-leading-the-fight-for-commercial-space-in-trumps-nasa/. [61]   Andy Pasztor, Sen. Jeff Sessions Exerts Wide Influence Over Trump Space Plans, Wall St. J. (Dec. 13, 2016, 6:56 PM), http://www.wsj.com/articles/sen-jeff-sessions-exerts-wide-influence-over-trump-space-plans-1481673405. [62]   Andy Pasztor, Thiel Pushes to Add Commercial-Space Backers to Trump NASA Team, Wall St. J. (Dec. 21, 2016, 11:22 AM), http://www.wsj.com/articles/thiel-others-push-for-trump-nasa-team-expansion-1482263645. [63]   Eric Berger, Will Trump Pick an "Agent of Change" or an Insider to Lead NASA, Ars Technica (Nov. 17, 2016, 9:58 AM), https://arstechnica.com/science/2016/11/will-trump-pick-an-agent-of-change-or-an-insider-to-lead-nasa/.
Gibson Dunn lawyers are available to assist in addressing any questions you may have regarding the issues discussed above.  Please contact the Aerospace and Related Technologies practice group co-chairs, Karen L. Manos, David Wilf, Perlette M. Jura, and William J. Peters; the additional authors of this update, Dhananjay S. Manthripragada, Jared Greenberg, and David M. Wolber; the Gibson Dunn lawyer with whom you usually work; or any of the following: Los Angeles David A. Battaglia (+1 213-229-7380, dbattaglia@gibsondunn.com) Perlette Michèle Jura (+1 213-229-7121, pjura@gibsondunn.com) William J. Peters (+1 213-229-7515, wpeters@gibsondunn.com) Eric D. Vandevelde (+1 213-229-7186, evandevelde@gibsondunn.com) Matthew B. Dubeck (+1 213-229-7622, mdubeck@gibsondunn.com) Dhananjay S. Manthripragada (+1 213-229-7366, dmanthripragada@gibsondunn.com) London Mitri J. Najjar (+44 (0)20 7071 4262, mnajjar@gibsondunn.com) Orange County Jared Greenberg (+1 949-451-3819, jgreenberg@gibsondunn.com) Casper J. Yen (+1 949-451-4105, cyen@gibsondunn.com) Rustin K. Mangum (+1 949-451-4069, rmangum@gibsondunn.com) New York David M. Wilf (+1 212-351-4027, dwilf@gibsondunn.com) Eric D. Vandevelde (+1 213-229-7186, evandevelde@gibsondunn.com) Nicolas H.R. Dumont (+1 212-351-3837, ndumont@gibsondunn.com) Eun Sung Lim (+1 212-351-2483, elim@gibsondunn.com) San Francisco Matthew Reagan (+1 415-393-8314, mreagan@gibsondunn.com) Washington, D.C. Karen L. Manos (+1 202-955-8536, kmanos@gibsondunn.com) David A. Wolber (+1 202-887-3727, dwolber@gibsondunn.com) Lindsay M. Paulin (+1 202-887-3701, lpaulin@gibsondunn.com) Erin N. Rankin (+1 202-955-8246, erankin@gibsondunn.com) Justin P. Accomando (+1 202-887-3796, jaccomando@gibsondunn.com) Brian M. Lipshutz (+1 202-887-3514, blipshutz@gibsondunn.com) © 2017 Gibson, Dunn & Crutcher LLP Attorney Advertising:  The enclosed materials have been prepared for general informational purposes only and are not intended as legal advice.

July 27, 2016 |
New Rules are Monumental for Commercial Drones

​Orange County associate Jared Greenberg is the author of "New Rules are Monumental for Commercial Drones" [PDF] published on July 27, 2016 by Daily Journal.

June 27, 2016 |
One Small Step or One Giant Leap? FAA Releases Final Rules on Commercial Drone Use in the United States

After more than a year of considering public comments on its February 23, 2015 proposed rules regulating the commercial use of small (weighing less than 55 pounds) unmanned aircraft systems ("UAS" or "drones"), the United States Federal Aviation Administration ("FAA") on June 22, 2016 issued its final rule, bringing the use of drones one step closer to mainstream commercial integration.

While the personal and commercial use of drones has mushroomed in recent years, a practical regulatory framework has lagged behind the technological innovation and economic demand driving the boom.  Proponents of the commercial use of drones have argued that this regulatory lag was stifling the growth of a market that is estimated to generate over $80 billion in the U.S. economy by 2025.

Under FAA regulations, drones fall under the broad definition of "aircraft," and therefore have been subject to the same regulations as a 747 passenger airliner.  These regulations include certification requirements for both the aircraft and the pilot before an aircraft can be operated in the national airspace, but the FAA acknowledged that the processes for obtaining these certifications were not designed for the unique considerations associated with small UAS.  

In 2012, Congress passed the FAA Modernization and Reform Act of 2012 (Public Law 112-95) ("Reform Act") in part to address these issues.  Section 332 of the Reform Act directed the FAA to develop a regulatory framework for the civil use of small UAS.  And until the framework was finalized, Section 333 of the Reform Act allowed the agency to make determinations on a case-by-case basis that a standard FAA airworthiness certification would not be required for a particular use of small UAS.

Although the Section 333 certification process was tailored specifically to address small UAS, and hence was a definite improvement over the general FAA airworthiness certification process, any commercial use of a small UAS still required a certification from the FAA nonetheless.

On February 23, 2015, the FAA released its proposed rules pursuant to Section 332 of the Reform Act.  After considering public comments (over 4,600 comments, as reported by the agency), the FAA published the final rule on June 22, 2016, which will go into effect after a 60-day public comment period.   

Overview of the Final Rule - Part 107

The FAA final rule adds a new Part 107 to Title 14 of the Code of Federal Regulations to allow routine commercial operations for small UAS without the need for airworthiness certification, exemption or other certificates of waiver or authorization (e.g., pursuant to Section 333).  In order to qualify for a Part 107 general authorization, the UAS and the UAS operator must satisfy several criteria set forth in the new regulations. 

With a few exceptions, many of these criteria remain unchanged in their terms as set forth in the February 23, 2015 proposed rules.  Some of the key requirements are as follows:  

  1. As in the proposed rule, the UAS must weigh less than 55 pounds, and fly at groundspeeds of less than 100 miles/hour;
  2. The maximum altitude for authorized small UAS use was lowered in the final rule from 500 to 400 feet, with a new exception that the UAS can break the 400-foot ceiling if it remains within 400 feet of a structure (i.e., to allow drones to inspect structures taller than 400 feet);
  3. The UAS can only be operated within daylight hours, although the final rules make an allowance for operation during "civil twilight" hours (30 minutes prior to sunrise and 30 minutes post sunset) if the UAS utilizes anti-collision lighting;
  4. The minimum age of a drone pilot was lowered from 17 to 16; and
  5. UAS pilots must obtain a remote pilot certification in order to operate a small UAS (or operate under the supervision of a certified holder).

Critically, particularly for certain segments of the commercial sector, the final rule did not change certain restrictions floated in the proposed rules which will have a significant limiting effect on the scope of commercial UAS use, namely:

  1. The UAS must be operated within the line-of-sight ("LOS") of the pilot or a "visual observer;"
  2. A UAS cannot be flown over persons not involved in the operation of the UAS; and
  3. If property is attached to the UAS, it cannot be flown across state or national boundaries, or the pilot would be deemed by the Department of Transportation to be an "air carrier" engaged in "air transportation," which is not covered by Part 107.

Response from Industry: A Good First Step but More Is Needed

Although the final rules have been fairly well received by drone manufacturers and industry trade associations as an important milestone in the commercialization of drone use, the general consensus even among proponents is that Part 107 is merely a first step in an ongoing process, and that much yet remains to be done in order to fully take advantage of and support growth of the burgeoning UAS sector. 

To be sure, certain commercial users of drone technology, including those engaged in television and film production, agriculture, rural real estate development, and surveying and inspection activities, are more pleased with the current state of regulation under Part 107 than are others, as Part 107 largely authorizes their needs.

Many other commercial players are not so content, particularly those who would like to use drones in some of the ways that have garnered more attention and discussion in the media – such as cross-country package delivery, an activity which arguably represents one of the largest potential growth areas for commercial use of UAS.  The current restrictions, particularly LOS restrictions, place these aspirations on hold for now.

In addition, the current 'overflight' restrictions significantly curtail the use of drones in metropolitan areas for a wide variety of potential users, including journalists, media and entertainment companies, urban real estate developers, and many others.

Many of those dissatisfied with the pace or results of regulatory change addressing UAS in the United States often point to parallel regulatory efforts in Europe by the European Aviation Safety Agency as both an example and a warning.  Set to be finalized later this year or in early 2017, the European legislation governing the commercial use of drones is expected to be more lenient than the rules set forth this week in Part 107, setting up (some argue) an uneven playing field for U.S. companies operating at home.

Finally, in the United States, federal lawmakers and regulators are not the only game in town when it comes to regulating commercial use of UAS.  Various state and local authorities will continue to have their input as well, and in fact, in its final rule the FAA explicitly denied to invoke federal preemption, stating instead that "[p]reemption issues involving small UAS necessitate a case-specific analysis that is not appropriate in a rule of general applicability."  This lack of general federal preemption likely will create, at least in the short run, a potentially complex patchwork of federal and state regulations that commercial drone operators will need to navigate in the United States. 

What's Next:  Slow and Steady

The limitations still present in Part 107 are in some measure intentional.  The FAA has acknowledged that the final rule does not address all of the current issues related to commercial use of small UAS, or the concerns of industry.  But rather than delay rulemaking further until a comprehensive framework could be developed (which to be fair may be a bit of a moving target considering the pace of technological change in the industry), the FAA has noted that its rulemaking is intended to be "incremental" "to enable certain small UAS operations to commence upon adoption of this rule and accommodate technologies as they evolve and mature."

In addition, the waiver process for deviations from the standard Part 107 requirements still exists. Part 107 includes a process for obtaining ad hoc certificates of waiver from the FAA for proposed uses of small UAS outside the standard guidelines.  The FAA has noted it will be creating an online portal to enable and streamline this process.

In addition, the release of the final rules marks commencement of another 60-day comment period, providing the public and industry with another opportunity to advocate for further last-minute amendments before the rule becomes effective in late August.

Conclusion

In sum, for many companies eager to reap the practical and economic benefits of UAS in the United States, the FAA's final rules embodied in Part 107 represent a welcome step in the right direction by doing away with the certification requirement for drone use that stays within the firm guidelines.  However, LOS and overflight restrictions still contained in Part 107 likely will continue to act as a significant obstacle to full realization of the potential of commercial drone use in the United States.

Industry will almost certainly want to continue to engage both federal and state regulators to advocate for broader authority in the commercial sector, particular if forthcoming European regulations addressing UAS create a marked disadvantage for companies in the United States.


Gibson Dunn's lawyers are available to assist in addressing any questions you may have regarding the above developments.  Please contact the Gibson Dunn lawyer with whom you usually work, or the authors of this alert:

Perlette Michèle Jura - Los Angeles (+1 213-229-7121, pjura@gibsondunn.com)
William J. Peters - Los Angeles (+1 213-229-7515, wpeters@gibsondunn.com)
David A. Wolber - Washington, D.C. (+1 202-887-3727, dwolber@gibsondunn.com)

Please also feel free to contact any of the following leaders and members of the firm's International Trade Practice Group:

United States:
Judith A. Lee - Co-Chair, Washington, D.C. (+1 202-887-3591, jalee@gibsondunn.com)
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Asia:
Robert S. Pé - Hong Kong (+852 2214 3768, rpe@gibsondunn.com)

Europe:
Peter Alexiadis - Brussels (+32 2 554 72 00, palexiadis@gibsondunn.com)
Attila Borsos - Brussels (+32 2 554 72 10, aborsos@gibsondunn.com)
Patrick Doris - London (+44 (0) 207 071 4276, pdoris@gibsondunn.com)
Penny Madden - London (+44 (0) 20 7071 4226, pmadden@gibsondunn.com)
Benno Schwarz - Munich (+49 (0) 89 189 33 110, bschwarz@gibsondunn.com)
Mark Handley - London (+44 (0) 207 071 4277, mhandley@gibsondunn.com)  


© 2016 Gibson, Dunn & Crutcher LLP

Attorney Advertising:  The enclosed materials have been prepared for general informational purposes only and are not intended as legal advice.

June 13, 2016 |
Drone Privacy: Voluntary Best Practices Released by Multi-Stakeholder Group

​Los Angeles of counsel Eric D. Vandevelde and Orange County associate Jared Greenberg are the authors of "Drone Privacy: Voluntary Best Practices Released by Multi-Stakeholder Group" [PDF] published in the June 13, 2016 issue of the Privacy and Security Law Report.

April 11, 2016 |
Sensible Regulations Encourage Drone Use

​Orange County associate Jared Greenberg is the author of "Sensible Regulations Encourage Drone Use" [PDF} published on April 11, 2016 by The Daily Journal.

Gibson Dunn Attorneys Honored with Legal Aid 2014 Pro Bono Publico Award

​In a ceremony on October 8, 2014, Gibson Dunn was honored with the Legal Aid 2014 Pro Bono Publico Award for providing excellent legal services to low-income New Yorkers. Members of Gibson Dunn's "D-SNAP Team" were awarded for a second consecutive year for their representation of disabled New Yorkers in a suit to obtain disaster food stamp benefits (so-called "D-SNAP" benefits) that those individuals were unable to apply for in the aftermath of Hurricane Sandy. The essence of the complaint is that the program violated city, state, and federal anti-discrimination laws by failing to provide disabled applicants with reasonable accommodations (such as permitting them to apply by phone or conducting home visits). The amended complaint names city, state, and federal agencies and their officials as defendants. After successfully obtaining the denial of the City's and State's motions to dismiss last year, Gibson Dunn this year led briefing in opposition to motions for judgment on the pleadings, in addition to briefing several other substantive motions to keep the Federal Government in the case. At the same time, the D-SNAP Team spearheaded an intensive discovery effort, reviewing tens of thousands of documents, issuing interrogatories, and taking depositions. The State and Federal Government have already issued new policies constituting a great deal of the prospective relief being sought in the case. D-SNAP Team members who will be honored at the ceremony include: Randy Mastro, Goutam Jois, Eric Yuen, Christine Demana, Seth Rokosky, David Crowley-Buck, Christian Hudson, Alyssa Kuhn, Genny Ngai, and former associate Ben Mishkin. The Legal Aid Society also honored Gibson Dunn attorneys representing the plaintiffs in De Ping Song, et al. v. 47 Old Country Road, et al. For the past two years, Gibson Dunn has joined the Legal Aid Society to fight for plaintiffs, six Chinese immigrants who were exploited by their employers, the defendant owners of multiple nail salons on Long Island. In March 2012, following a jury trial conducted by Legal Aid, a federal jury awarded our clients a nearly half-million dollar judgment as a result of defendants' illegal wage practices. Legal Aid approached Gibson Dunn to assist with the difficult matter of judgment collection. The defendant employers proceeded to sell their homes and businesses, flee the country, file fraudulent bankruptcies, obstruct court orders, and otherwise evade the judgment. Through motion practice, depositions, and numerous hearings in the United States District Court and the United States Bankruptcy Court, the Gibson Dunn team worked tirelessly to track down Defendants and their assets. And during this past year, the team's efforts have begun to paid off. The team has secured financial settlements with several third-party creditors and successors to the defendants, resulting in our clients' receipt of $60,000 and expected receipt of an additional $54,000 soon. toward the outstanding judgment. The Legal Aid Society and Gibson Dunn will continue to work on behalf of our clients until they receive the entire judgment they are owed under the law. Members of this team honored at the ceremony were: Richard Mark, Matthew Benjamin, Lisa Umans, Yi Sun, Shira Weiner and former Gibson Dunn associates Michelle Katz and Will Han. Finally, Paul Kremer was honored for his work on behalf of a disabled husband and his wife in a termination of benefits proceeding before the NYC Housing Authority in which he obtained dismissal of the proceeding based on showing that NYCHA had sought to terminate benefits based on the client's refusal to move to housing that did not reasonably accommodate his disabilities.