John McGonagle: Sky is the limit, but make space to keep feet on the ground

John D. McGonagle is a Senior Associate, Dentons
John D. McGonagle is a Senior Associate, Dentons
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You are probably aware that Scotland was once the shipbuilder to the world. You are less likely to know that in the present day, more satellites are currently being built in Glasgow than any other city in Europe.

In its Size & Health of the UK Space Industry 2018 report, consultancy London Economics estimated that the space industry generated more than £140 million per annum for the Scottish economy, and the Scottish Government has stated its intention to acquire a £4 billion share of the global space market by 2030.

Satellite In Space. 3D Scene.

Satellite In Space. 3D Scene.

In September, the First Minister announced a Scottish Enterprise support package worth almost £15 million for Spire, a global nanosatellite and data analysis company with a key manufacturing facility in Glasgow. Spire already employs 60 workers to help build, test and operate nanosatellites that monitor aviation, maritime and weather patterns, and it is intended that this support package will lead to Spire’s Glasgow workforce expanding to almost 300.

In total, more than 80 UK space industry firms have headquarters located in Scotland. Glasgow is home to Clyde Space (a world-leading supplier of miniaturised satellites, with clients including NASA, the US Air Force and the UK Space Agency) and Alba Orbital, which focuses on getting people to build and launch their own satellites. In Edinburgh, satellite mapping technology company, Ecometrica, uses data from satellites and drones to create sustainability reporting insights for the private and public sector, and Skyrora specialises in the development of launch vehicle technology, which reduces the cost of space launches.

These companies are conducting innovative research and developing new technologies. However, technology companies have a notorious tendency to innovate and grow so quickly that they outpace legal governance and risk management procedures.

Where complex technology, satellite platforms and software are being engineered and developed, space tech companies need to develop internal procedures for the protection of valuable intellectual property rights (IPRs), ensure employment contracts contain suitable provisions and, in order to avoid infringement claims, set controls around the disclosure of IPRs and confidential information.

An appropriate regime to protect IPRs should be identified as early as possible. Patents are granted in the UK for inventions that are new, involve an inventive step and are capable of industrial application. In exchange for publishing details of inventions and how they are put into effect, the holders of a patent are granted a time-limited monopoly to exploit their invention. Software can be patented if it can be shown that the software makes a “technical contribution” to the state of the art. Otherwise, software is protectable by copyright, with protection typically lasting for 70 years from the end of the calendar year in which its author dies. Design drawings can similarly be protected under copyright.

Relying on patents or copyright may not always be appropriate. Trade secrets are a specific form of confidential information which are commercially valuable and give the owner a competitive advantage (an obvious example being the recipe for Irn Bru). Unlike other forms of IPRs, trade secrets are not disclosed and tend to be protected from competitors by a combination of technological, legal and security measures.

Space tech companies are also likely to need advice in negotiating licence and service agreements with major customers over use of their technologies. Where a space tech company is outsourcing or sub-contracting the manufacture of technology, vital components, or software, then it should be wary of classic pitfalls. For example, any new IPRs generated should be expressly stated to be owned by the company. There should be clear milestones, and remedies for any delays. Payment should be withheld, or part withheld, until delivery of an accepted prototype.

In regard to investment or exit strategies, every space tech company should be aware that potential investors or purchasers will expect rigorous documentation of all agreements, arrangements and licences relating to the development and licensing of IPRs.

Ultimately, lawyers must be pragmatic and allow for creativity and innovation, while ensuring ambitions do not overstep fundamental ethical, legal and regulatory boundaries. It is a delicate balance. To paraphrase JFK – sometimes we choose to be lawyers not because it is easy, but because it is hard.

John D McGonagle is a Senior 
Associate, Dentons