Aerospace Law: Legal Challenges Facing Aviation and Defense Companies

A company negotiating a defense subcontract may simultaneously face FAR/DFARS compliance requirements, ITAR restrictions on the underlying technology, FAA certification obligations, and IP licensing terms tied to government data rights. Each area has its own regulatory structure and enforcement mechanism; missing one tends to compound the others. For aerospace and defense companies, attorneys who are fluent across all of these areas provide meaningfully different value than those who focus on just one.

Companies contracting with the Department of Defense must follow the Federal Acquisition Regulation (FAR) and the Defense Federal Acquisition Regulation Supplement (DFARS). These rules govern pricing, cost accounting, cybersecurity obligations, and IP rights in government contracts. Non-compliance can result in contract termination, debarment, or liability under the False Claims Act (31 U.S.C. § 3729 et seq.).

Key compliance areas include:

• Certified cost or pricing data under FAR Part 15
• Cybersecurity safeguards under DFARS 252.204-7012 (Safeguarding Covered Defense Information)
• Flow-down obligations passed to subcontractors
• Truth in Negotiations Act (TINA) requirements under 41 U.S.C. § 3502

Subcontractors are often bound by flow-down clauses that import FAR/DFARS obligations into their agreements, without the internal resources to manage compliance across a long supply chain. Counsel experienced in defense and government services helps companies negotiate risk allocation, handle termination for convenience provisions, and protect proprietary data rights before a contract is signed.

Product liability claims against aircraft manufacturers arise under state tort law, but federal preemption arguments are common where FAA regulations define the applicable standard of care. In New York, strict product liability follows the standard established in Voss v. Black & Decker Manufacturing Co. (59 N.Y.2d 102, 1983), requiring proof that the product was defective and that the defect caused the injury.

For general aviation manufacturers, the General Aviation Revitalization Act of 1994 (GARA) provides an 18-year federal statute of repose for aircraft with a maximum certified takeoff weight of 12,500 lbs. .r less. This protection does not apply to commercial aircraft or to claims where willful misconduct is alleged.

A type certificate, supplemental type certificate (STC), or production approval defines the legal scope of a manufacturer's operations. Modifying a product outside the approved design or deviating from approved manufacturing processes can expose a company to airworthiness enforcement and weaken its defense in civil litigation. Aligning certification records with legal defense strategy is work better done before a dispute arises than during one.

The International Traffic in Arms Regulations (ITAR), administered by the State Department's Directorate of Defense Trade Controls (DDTC), cover defense articles and services listed on the U.S. Munitions List (USML). The Export Administration Regulations (EAR), administered by the Bureau of Industry and Security (BIS), cover dual use items on the Commerce Control List (CCL).

ITAR applies broadly, including to technical data, software, and services. Sharing controlled technical data with a foreign national inside the United States constitutes a "deemed export" requiring prior authorization. Effective export controls compliance requires:

• Jurisdiction and classification reviews for each product and technology
• Technology Control Plans (TCPs) for controlled technical data
• Denied party screening for business partners and personnel
• Records retention under 22 C.F.R. Part 122 (ITAR) and 15 C.F.R. Part 762 (EAR)

Civil penalties for ITAR violations can reach $1,000,000 per violation under 22 U.S.C. § 2778(c). Criminal penalties include fines up to $1,000,000 and imprisonment up to 20 years per count. The State Department's enforcement division pursues actions against both large prime contractors and smaller suppliers. Debarment from future government contracting is an additional consequence.

Patents protect novel inventions but require public disclosure and are subject to inter partes review at the USPTO. Trade secrets protect confidential technical information without any disclosure requirement, provided a company maintains reasonable secrecy measures. The Defend Trade Secrets Act (DTSA) of 2016 (18 U.S.C. § 1836 et seq.) provides a federal civil cause of action for trade secret misappropriation. Trade secret protection is relevant in teaming arrangements and supplier relationships where controlled technical data changes hands.

When a company develops technology under a government contract, the government acquires specific rights in the resulting data and software. FAR 52.227-11 governs patent rights in inventions developed with federal funding; DFARS 252.227-7013 governs rights in technical data under defense contracts. Companies that do not define IP ownership before entering a government contract may find the government holds broader rights than anticipated.

The Contract Disputes Act (CDA) (41 U.S.C. § 7101 et seq.) governs disputes between federal contractors and government agencies. Before seeking relief at the Armed Services Board of Contract Appeals (ASBCA) or the U.S. Court of Federal Claims, a contractor must submit a certified claim to the Contracting Officer. The CDA imposes a six-year statute of limitations from the date a claim accrues (41 U.S.C. § 7103(a)(4)(A)). The Federal Circuit treats this deadline as jurisdictional, meaning courts may dismiss untimely claims without reaching the merits.

In commercial aerospace disputes, including those between prime contractors and subcontractors, parties often choose arbitration over litigation to protect confidentiality and avoid delays in federal court. Arbitration clauses in aerospace contracts should address scope, governing law, seat of arbitration, and whether provisional remedies are available pending the final award.