The $400 Billion Government Defense Contract – Lockheed F-35

In a recent Reuter’s article written by Andrea Shalal-Esa entitled:  Pentagon, Lockheed “getting close” on next F-35 contract: Kendall, provides some interesting insights into the world of government defense contracts.  Moreover, the article also sheds some light on the recent tensions between the Pentagon and Lockheed Martin Corporation, the manufacturer of the F-35.

The Lockheed Martin F-35 Lightning II is a family of single-seat and single engine multipurpose fighters.  The plane has been designed to perform ground attack, reconnaissance and air defense with stealth capabilities.  There are three primary models of the aircraft:

  • F-35A – A conventional takeoff and landing model that descended from the X-35 (the product of the Joint Strike Fighter Program)
  • F-35B – A short take off and vertical model
  • F-35C – A carrier based version of the aircraft

 History

In October 2001, when the U.S. Defense Department awarded Lockheed Martin the contract to develop the Joint Strike Fighter, it looked like the deal of the century for the company and its customer. In the largest defense procurement in history, Lockheed would produce three variants of one stealthy design to replace the mixed and aging fleets of three U.S. services, saving money and time.

Eleven years later and the program has been plagued by cost over runs and technology problems.  On October 26, 2012, the Pentagon announced that it was withholding $46.5 million from Lockheed Martin Corp because of continued flaws with a business system used to track costs and schedules for the F-35 fighter.

The F-35 has been criticized by Pentagon officials and lawmakers for test-performance failings, delays and its ballooning cost. At an estimated $395.7 billion for eventual production of 2,443 planes, the cost is up 70 percent, adjusted for inflation, from the $233 billion projected when Lockheed Martin won the program from Boeing Co. in late 2001.

What’s even more shocking is that maintenance costs for the aircraft are estimated to be $1.1 trillion over the next 50 years. The F-35 program has been restructured three times in recent years, in part to try to cut costs. Earlier this year the Pentagon said “no more money” would be put toward cost overruns and the military would buy fewer planes if costs rose.

The Defense Department is also bracing for sequestration, a process that would cut the military’s budget by $50 billion a year over a decade, on top of more than $50 billion in annual cuts already on the books.

The aircraft employs advanced technology and weapons systems which are controlled by technology. 9.4 million lines of code are required to manage the aircraft.

A helmet is being developed by Vision Systems International (VSI), a joint venture between Israel’s Elbit Imaging and Rockwell Collins succeeds, it will be the most advanced ever built. It is supposed to let pilots see data from all the plane’s sensors, effectively allowing the pilot to look right through the floor of the plane and all around it. But the project has run into problems with night vision, delays in displaying data, jitter under certain conditions, and more recently, a green glow at the visor’s edges and problems with alignment.

Lockheed and the Defense Department are nearing agreement on a long-delayed contract for a fifth batch of F-35 fighter jets, the Pentagon’s chief weapons buyer told Reuters on Wednesday. “I think we’re getting close,” Defense Undersecretary Frank Kendall told Reuters after a speech to an investor conference hosted by Credit Suisse. Kendall said he had “a very positive meeting” on Tuesday with Lockheed President Marillyn Hewson about a range of issues, including the $396 billion F-35 program, the Pentagon’s largest weapons program.

Business Integrity – An Important Corporate Investment

On Wednesday, the U.S. government banned BP Plc from new federal contracts.  The reason for the ban? BP’s “lack of business integrity” in the 2010 Deepwater Horizon oil spill. The following is the announcement by the Environmental Protection Agency:

The U.S. Environmental Protection Agency (EPA) today announced that it has temporarily suspended BP Exploration and Production, Inc., BP PLC and named affiliated companies (BP) from new contracts with the federal government. EPA is taking this action due to BP’s lack of business integrity as demonstrated by the company’s conduct with regard to the Deepwater Horizon blowout, explosion, oil spill, and response, as reflected by the filing of a criminal information. On November 15, 2012, BP agreed to plead guilty to eleven counts of Misconduct or Neglect of Ship Officers, one count of Obstruction of Congress, one misdemeanor count of a violation of the Clean Water Act, and one misdemeanor count of a violation of the Migratory Bird Treaty Act, all arising from its conduct leading to the 2010 Deepwater Horizon disaster that killed 11 people and caused the largest environmental disaster in U.S. history.

For the Deepwater Horizon investigation, EPA was designated as the lead agency for suspension and debarment actions. Federal executive branch agencies take these actions to ensure the integrity of Federal programs by conducting business only with responsible individuals or companies. Suspensions are a standard practice when a responsibility question is raised by action in a criminal case.

The BP suspension will temporarily prevent the company and the named affiliates from getting new federal government contracts, grants or other covered transactions until the company can provide sufficient evidence to EPA demonstrating that it meets Federal business standards. The suspension does not affect existing agreements BP may have with the government.

The British energy conglomerate has agreed to pay $4.5 billion in penalties, including a record $1.256 billion criminal fine.

So what does this mean for BP?  The Company is currently the largest investor and leaseholder of deep water tracts in the Gulf of Mexico.  Moreover, BP is both the number one supplier of fuel to the United States military and the single largest buyer of oil in the entire world.  In the event that civil courts find BP to be grossly negligent, the Company could incur costs of an additional $20 billion to settle ongoing federal and state civil litigation.

We believe that BP’s corporate actions in handling Deepwater Horizon disaster will provide a model case study for corporate investment in business integrity.  While it’s always painful to have to disclose significant corporate expenditures to the financial community, the loss of future business for BP could very well make it very difficult for the company to recover.

Law Firms Face Challenges in Growing Profits Reports Citi

In a recent Wall Street Journal Blog Article written by Jennifer Smith entitled: Citi: Lackluster 3rd Quarter Bodes Ill for Law Firm Profit Growth, it was reported that law firms will face significant challenges in trying to grow their profits. The folks at Citi Private Bank expect law firms will see even lower profit growth this year on an industry-wide basis than they did in 2011, when they notched a 3.5% gain (paltry by pre-recession standards).

Citi, a major law firm lender, reached that dismal conclusion after analyzing third-quarter performance among 182 mostly large firms. While the results aren’t public, the bank posted a summary over at AmLaw Daily.  Citi identified the following problems in their report:

  1. Law firms are wrestling with weak demand for their services
  2. Law firm expenses continue to grow faster than their revenue

Since the Citi Report only analyzes the performance of a small number of law firms (182 mostly large law firms and there are an estimated 50,000 law firms throughout the United States), the results are “industry averages” and do not reflect the success of those firms who continue to perform well.

What’s even more interesting is that there may very well be some shifting in the way that legal services are utilized.  Corporations may be in-sourcing more of their need for legal services.  Where work is still being outsourced, more of this work may be going to smaller law firms as companies are seeking to avoid the ever rising billable hourly rates of the larger firms.

We at Legal Bistro have our own views on the changes that are taking place in the market for legal services and will write our own article on this topic.

Are Intellectual Property Laws Ready for 3D Printing?

In September the Brooklyn, N.Y. firm Makerbot started selling the $2,200 Replicator 2, its latest and most polished 3-D printer.  The machine is a very sleek piece of machinery that extrudes ultrafine strands of heated plastic in layers to turn software models into detailed, solid objects. The above product release video features Makerbot founder Bre Pettis and is worth watching.  Mr. Pettis provides an overview on all of the enhancements that have been incorporated into the Replicator 2 and his closing words provide the basis for our blog posting:

“We can’t wait to see what you make with it”!

A recent Forbes article written by Andy Greenberg entitled:  Inside Thingiverse, The Radically Open Website Powering The 3D Printing Movement provides some further insight into the possibilities.

Anyone who buys a Makerbot can immediately download and print any of Thingiverse’s 25,000 designs. Those with the software skills to create new designs and upload them to the site are rewarded with hacker fame and remixes from others in the digital DIY community. And every new blueprint on the site boosts the utility of the machines sold so far.

Pettis says that openness has been part of the site’s philosophy since 2008–a year before Makerbot was even founded–when he and fellow Thingiverse creator Zach Smith built the site in an hour one Saturday afternoon. “We keep it open because it feels right,” says Pettis. “There’s no downside to sharing it. All the competitors are going to make stuff and share on Thingiverse, too, and that just benefits our community.”

But Pettis’ and Thingiverse’s dream of pure openness may be just that. A quick browse through the site turns up plenty of potentially trademarked or copyrighted designs, like an Iron Man helmet or figurines from Star Wars and the videogame Doom. The site has already had to remove several designs after receiving takedown notices under the Digital Millennium Copyright Act. And the first rumblings of a rights-management system for controlling the sharing of physical things are appearing: The IP-hoarding firm Intellectual Ventures received a patent in October for a 3-D printer feature that blocks the creation of verboten objects.

Thingiverse has yet to face an intellectual property lawsuit over the infringing content its users upload, like the $1 billion tort that Viacom threw at Google’s YouTube service in 2007. The lawsuit, which is still ongoing, has cost Google millions in legal bills and pushed it to adopt its own proactive copyright protections. The intellectual property laws around software designs for physical things have yet to be hammered out, but Makerbot remains determined to avoid censoring content unless it’s absolutely required to. “For now, it’s an exciting time,” says Pettis. “Things aren’t ruled by copyright.”

So let’s get back to Pattis’s final quote in the product video: “We can’t wait to see what you make with it”!  Despite a clause in Thingiverse’s terms of use that bans uploading any design that “contributes to the creation of weapons, illegal materials, or is otherwise objectionable,” the site hosts a slew of blueprints for edgy objects that toe that line or cross it: secret keys to high-security handcuffs, realistic toy guns or, scarier still, restricted gun components that can be combined with mail-order parts to create a working AR-15 semi-automatic weapon. One group calling itself Defense Distributed hopes to create a file for a gun capable of shooting a .22 caliber bullet and may upload its final design to Thingiverse.

Pettis has treated the appearance of those objects on the site as inevitable–almost out of his control. “The cat is out of the bag,” Pettis wrote in a blog post to the Thingiverse community last year, addressing the presence of weapon components on the site. “And that cat can be armed with guns made with printed parts.”

For further information, please refer to the Forbes article and watch the video below:

We find this a fascinating area and one that deserves a follow up article. Stay tuned!

Are You Concerned About “Patent Trolls”?

According to Wikipedia, definitions for a “patent troll” include one or more of the following:

  • Purchases a patent, often from a bankrupt firm, and then sues another company by claiming that one of its products infringes on the purchased patent;
  • Enforces patents against purported infringers without itself intending to manufacture the patented product or supply the patented service;
  • Enforces patents but has no manufacturing or research base;
  • Focuses its efforts solely on enforcing patent rights;
  • Asserts patent infringement claims against non-copiers or against a large industry that is composed of non-copier.

Patent trolls are to patent law what ambulance chasing lawyers are to personal injury law. While patent enforcement has always been a big business, the recent wars between Apple and Samsung have brought a great deal of attention to this part of the law.

In a recent Forbes article written by Cheryl Milone, the founder and chief executive of Article One Partners, entitled A Powerful New Weapon Against Patent Trolls, relief may finally be on the way.  The America Invents Act patent reform law, which passed last year, contains a little-known feature that will soon give companies a lot more ammunition for shooting down patent troll lawsuits.

A critical determinant for patents is what is known as “prior art”. Prior art means any previous patent, technical paper, or public knowledge or use of an invention that makes it ineligible for a patent. Under the law, a patent may be issued only if an invention is useful, novel (i.e., not previously known or described), and nonobvious—meaning, not an obvious outgrowth of an existing technology. An examination of prior art determines whether an invention is novel and nonobvious.

As a result of the America Invents Act, after March 16, 2013, the following changes become affective which will redefine the application of prior art and have a dramatic impact on existing patents:

  • Unpublished patent applications: For the first time, unpublished patent applications, i.e., applications pending in the USPTO system for less than 18 months, can invalidate a later patent if these contain prior art that anticipates the invention.
  • Foreign patents and applications: For the first time, foreign applications and patents can also invalidate a later U.S. patent, if they contain prior art that anticipates the invention. According to Gene Quinn, of the influential IP Watchdog blog, “Foreign patents and  applications will now make it much easier to challenge issued U.S patents.
  • Public use anywhere in the world: The biggest new source of invalidating prior art involves “on sale” or “public use”—i.e., has an invention been previously used, offered for sale, or publicly disclosed?—which is being expanded from the U.S. to cover the entire globe. This means that even a seminar discussion about some interesting new technology at an engineering conference in Korea or China, presented in the Korean or Mandarin language, will be able to kill a U.S. patent on that technology acquired later.

Cheryl’s article provided some great insight into some of the most significant changes to hit the patent landscape in almost a century.  We will report further on the topic next year after the changes go into affect.  We anticipate a great  deal of creativity from the legal community in this area.

Interesting Attorneys – D. SCOTT WRIGHT – Wright, Green, P.C.

In the first of what we expect will be a long term successful series of Blog Postings of Interesting Attorneys, Legal Bistro is pleased to present D. Scott Wright of Wright, Green, P.C. Scott is  a senior member of the firm and currently managing shareholder, graduated from Cumberland School of Law of Samford University in 1978. Scott is a native of Tennessee.

Our primary objective for our Interesting Attorneys series of blog postings is to recognize lawyers who are doing very unique and interesting things in their personal live.  We are not seeking to endorse any lawyers for their legal expertise.  We selected Scott because of his stage talent and presence.

Scott’s interest in music and theater date back to his very earliest memories and keep his non-billable hours busy. He is a classical singer, conductor, composer, and award-winning actor, having appeared on stages across the Central Gulf Coast in opera, musical theater, oratorios and in roles as diverse as Cervantes/Don Quixote in Man of La Mancha, Sr. Capulet in Romeo & Juliet, Morales in Carmen, Marco in Gianni Schicchi, and Emile DeBecque in South Pacific, to name only a few. His credits include over forty opera productions and as many stage plays. He has performed, as a bass-baritone, with four symphony orchestras.

Scott was the conductor of the Bay Area Strings Community Orchestra and assistant conductor of the Mobile Symphony Youth Orchestra, both part of the family of Mobile Symphony, Inc. from 2004 to 2009. He has served as a director and officer of several arts organizations including as president of the Mobile Arts Council. In 2001 he was the “man in the white suit” for nationally-aired television commercials advertising Mobile, Alabama’s tri-centennial. With his wife he recorded two CDs of songs from the WWII era as a fund-raiser for the benefit of the WWII Memorial Foundation. He is also the author of many musical compositions and one humorous book, Ernest Hart.

 

 

Google+ Recognizes the Importance of Online Reviews & Recommendations

In a recent article written by Drew Olanoff entitled: Google Shopping Launches Features To Help You Read Reviews From People You Know, Techcrunch reported that Google+ is now being integrated into Google shopping.  You will now be able to write reviews on Google shopping and share them with your family and friends.

Google is using a “Star Rating System”.  The following is an example of a review posted for an ice cream maker:

At Legal Bistro, we also recognize the importance of online recommendations and have provided the functionality for attorneys to build their online credibility by obtaining both personal and professional recommendations.