The Legal Framework

ENGR 340 – Spring 02

The Legal Framework

Should Engineering Students Really Care About Business Law?

Yes or No ?

Paulo F. Ribeiro, MBA, Ph.D., PE

March 4, 2002 AD

If you say no, your professional career is headed towards insignificance or disaster.

Engineers should not practice law just as lawyers should not practice engineering, However, just knowing the basics of business accounting, contracts, and legal implications will help the young engineer practice engineering more appropriately.

Engineers should have an understanding of basic legal principles and broad guidelines of law.

What is an Engineer?A Thinker? An "Action Figure?" An Organizer? A Problem Solver? What about "Human" problems?

What is a Manager?Qualities of a Manager

Communication Skills Handling People Sense of Cost Knowledge of the Law

Law and EngineersEngineers Act as Agents of Owners Engineers deal with rights of others Engineers responsible for contract documents Engineers may be mediatorsEngineers Are Moral Agents

Therefore, a knowledge of business law is essential!

Some Fundamental Questions

The danger of depending on technology for societal solutions is that technology is usually divorced from those permanent principles of morality upon which all just social/political solutions depend. For example, words like "justice," "virtue," "mercy" and "duty," are terms without meaning within the technological framework. And so while technology is not necessarily evil, it can easily become a tool for evil because it has no firm grounding in morality. The engineer has the obligation to serve as a moral agent.

I insist that engineering students should have a proper understanding of of business law before

graduating:

Product Liability(Breach, Negligence, Fraud)

Intellectual Property

Employment Law

Contract

Dispute Resolution

DO NOT OVERLOOK BUSINESS LAW ISSUES(ASD PG&E Expert Witness)

The Entry-Level Professional and Legal Considerations

Preparing Contracts For Services(ASD Contracts for Brazil)

Interpreting Contracts once Project is Underway(Alaska Project)

Managing To Minimize Personal and Organizational Liability(Load Forecasting in Brazil)

Anticipating or Preparing For Expert Witness Testimony(PG&E Expert Witness)

Being Aware of Local, State and Federal Laws and Rules(AEP Line in Virginia)

Being Aware of Additional Resources – Funding (State and Federal)(Navy, DOE)

Being Aware of Pending or Recent Legislations(Washington DC, IEEE)

Legal Terminology

Breach Violation of right, Duty or Law

Fraud Intentionally deceitful practice

Liability Being bound or obligated according to law or equity

Negligence Breaches… duty below the appropriate standard of care

Tort Similar to “wrong” – distinguished from a crime

A New Concept of Social Injustice

The search for someone to blame is always successful.(Robert Half)

New Tendency to Look For “Deep Pockets.”

Government Agencies

Contractors

Manufacturers

Litigation Explosion

Babcock & Wilcox (Asbestos)Power Companies (Cancer due to Low Frequency M Fields)

Liability: Incurring It

Liability is defined as “being bound or obligated according to the law.

Strict Liability - Liability even when there is no proof of negligence. Often applicable in product liability cases against manufacturers, who are legally responsible for injuries caused by defects in their products, even if they were not negligent.

Many Opportunities to Incur It

Breach Negligence Fraud

Narrative

Jane is a recent graduate engineer working for an electrical consulting company. She is given the job of laying out the wiring for a new home. In particular, she must specify the circuit breakers that protect the circuits to the wall plugs of each room and the ceiling lights. Normally these circuits are wired with AWG #14 wire and are protected by 115 V/ 15 A breakers.

A co-worker, who is an production engineer tells her that

she should specify 115 V/ 20 A circuit breakers because

each circuit then could handle higher current appliances or

more appliances at a time. Subsequently, the house was

built with the #14 wire installed in the appropriate circuits and

protected with 115 V/ 20 A circuit breakers as specified by Jane.

Two months after the house was built and the family moved in, a fire occurred in the house causing $75,000 worth of damage. The fire marshall's report stated that the fire was caused by an electric toaster having a short circuit in it.

Was Jane correct in specifying the 20 A breaker rather than the 15 A breaker for this house?

There are two general theories in product liability:

Negligence

Strict Liability in Tort

Strict Liability in Tort:

Manufacturing defects

Design defects

Failure to warn

The law defines failure to warn as the problem in two situations:

Foreseeable risks could have been protected by instructions or warnings

The warnings themselves, when followed caused the injuries.

Liability: Incurring It

Exposure To Liability – Testing Understanding

1. Participating in necessary conference and preliminary studiesBreach: contract promises X meetings, only had Y.

2. Interpreting physical restrictions as to the use of the landNegligence: failed to allow for building set backs

3. Assisting in presentation of a project before bodies possessing approval-disapproval powerFraud: falsely claiming that lower level government units and agencies approve.

4. Keeping accurate books records.Breach: failing to do and submit when required

Liability: Examples of Failure and Lessons Learned

Collapse of Hotel Walkway (Kansas)

A sense of responsibility and accountability must be established within an organization to minimize the probability of errors in calculations such as happened in the case of the walkway collapse in that the support rods were originally under-designed.

A responsibility of the technical professional does not necessarily end with the preparation of plans and specifications. Conscientious review and approval of shop drawings may be part of the firm’s contractual responsibilities.

An understanding of fundaments, such as those presented in a first or second year college-level is essential to successful design and to the review of design changes proposed during construction.

Liability: Examples of Failure and Lessons Learned

Two fishermen died from sulphur dioxide they used to process fish.

A claim was made that no one told them of the danger. The chemical had a warning saying it could mix with water and release toxic sulphur dioxide gas. The warning was ruled inadequate.

You need to evaluate the adequacy of warnings.

Two adults and three children were killed when their 17 ft. Bayliner sailboat turned over and flooded on Lake Michigan.

Lawsuit alleged Bayliner failed to effectively design the boats centerboard trunk hole through which a rope runs to raise and lower the retractable centerboard keel, somewhat like a pocketknife.

Bayliner had recognized the hazard after the sale and conducted a retrofit campaign. No incidents of the problem resulting in injury were reported before this case.

Jury ruled the product was not defective, no duty to warn existed.

Liability: Examples of Failure and Lessons Learned

Liability: Examples of Failure and Lessons Learned

In your Senior Design Project So Far …

Any situations which could lead to potential problems in the future had you not properly addressed the issues.

At Vanderbilt

Engineering Failure: The Dark Side of Technology. The course provides students with a grasp of the serious consequences of engineering failures and how they impact society. Perspectives are drawn from case histories. The societal cost of failure, underlying human values, the issue of liability, causes of failure, and failure prevention strategy are examined. Technology-Society elective

Liability: Examples of Failure and Lessons Learned

At Calvin

Christian Perspective of Engineering Throughout the entire program we strive to bring an integrated perspective of engineering. Competence, Wisdom, Integrity and Responsibility.

I get very frustrated when engineering students write in their course evaluation that a Christian perspective of engineering does not matter. They seem to confuse the devotional aspect with the moral component of the lessons taken from Scripture. Engineering practice is constantly requiring moral value decisions. Normative Design should be our goal.

Liability: Examples of Failure and Lessons Learned

Liability: Minimizing It

Insurance: Financial Protection ($$$$ - 61% claims paid – 10% settled out of court)

Preventive practicesIncorporate PracticeLimit Practice to Safer Disciplines (BXWT)Incorporate High-Risk Services and Areas Separate (BWXT)Maintain Currency and Competence (Microsoft)Use Standard Contract Forms (EPRI Contracts)Utilize Tested Legal Language (Working with Lawyers)Develop, Maintain, and Use Written Guidelines (Systems Engineer)Document Everything (Write clear Memos)Supplement Written Documentation (Digital Camera)Accept Primary Responsibility fir Use of Computer Programs and Models

Liability: Minimizing It

Preventive practicesSeparate Facts and OpinionsHire Only Insured Sub-ConsultantsRespond In A timely FashionLimit Project Comments to Knowledgeable PersonsAvoid Financial Interest in Project (ENRON)Use Peer Review (Team Work)Do It Right The First TimeSign Reports In Corporate Name OnlyCommunicate!!!!! With Those You ServePlace Liability-Limiting Provision in Contracts

Strict liability is a tort theory of recovery based on the alleged carelessness of the defendant's behavior.

False or True?

Negligence is the theory of liability based on careless behavior while strict liability focuses on liability without fault due to the extreme danger of the behavior engaged in (transporting cases of dynamite).

The primary purpose of tort law is to undo injury to someone through the mechanism of compensatory money damages.

False or True ?

The goal of this area of law is to try to make an injured party "whole" again by providing money damages to cover all the costs (pain and suffering, lost salary, medical expenses, property damage, etc.) attributable to the injury causing behavior of the defendant.

Application - Testing Understanding

Intellectual Property

• Often a business’s most valuable asset

• Three types protected:

– patents

– copyrights

– trademarks and other marks

In a society which places an ever-greater value on specialist knowledge and which looks for creative solutions to solve a diverse range of world problems, the need for a fair and efficient intellectual property system is paramount.

Whether you are concerned with the Internet, the environment, pharmaceuticals or music, who owns what rights and how those rights are protected is something you should know.

Intellectual Property

Intellectual property is a product of the intellect which is owned in some way by an individual or an organization, who can then choose to share it freely or to control its use.

Intellectual property is found almost everywhere - in creative works like books, films, records and software, and in everyday objects like cars, computers, drugs and varieties of plants, all of which have been developed thanks to advancements in science and technology.

Intellectual Property

Patents

• Federal Patent Statute of 1952

• Invention requirements: novel, useful, not obvious

• Cannot be renewed

• Patentable subject matter:

– machines

– processes

– compositions of matter

– improvements to existing machines, processes, or compositions of matter

– designs for an article of manufacture

– asexually reproduced plants

– living material invented by man

Patents

• U.S. follows first to invent rule, rather than first to file rule

• U.S. patent law changes effective in 1995:

– patents valid for 20 years

– patent term begins from date application is filed, not when patent is issued

– brought U.S. system in harmony with majority of other developed nations

• Public use doctrine: patent may not be granted if the invention was used by the public for more than one year prior to the filing of the application

• Patent infringement: unauthorized use of another’s patent, damages may be recovered

Copyrights

• Copyright Revision Act of 1976

– establishes requirements to obtain copyright

– protects copyrights against infringement

• Tangible writings (physically seen, not ideas) are subject to registration and protection

• Copyright infringement: when a substantial and material part of a copyrighted work is copied without permission

• Fair use doctrine: permits certain limited use of a copyright by someone other than the copyright holder without permission from the holder

Copyrights - Language

Definitions:

''Copies'' are material objects, other than phonorecords, in which a work is fixed by any method now known or later developed, and from which the work can be perceived, reproduced, or otherwise communicated, either directly or with the aid of a machine or device. The term ''copies'' includes the material object, other than a phonorecord, in which the work is first fixed.

A work is ''created'' when it is fixed in a copy or phonorecord for the first time; where a work is prepared over a period of time, the portion of it that has been fixed at any particular time constitutes the work as of that time, and where the work has been prepared in different versions, each version constitutes a separate work.

US CODE - TITLE 17 > CHAPTER 1 > Sec. 101.

http://www4.law.cornell.edu/uscode/

Copyrights

• Uses permitted by fair use doctrine

– quotation of work for review or criticism, or in a scholarly or technical work

– use in a parody or satire

– brief quotation in news report

– reproduction by teacher or student of a small part of the work to illustrate a lesson

– incidental reproduction in a newsreel or broadcast of an event being reported

– reproduction in a legislative or judicial proceeding

Trademarks

• Law intends to:

– protect owner’s investment and good will in a mark

– prevent consumer confusion as to the origin of goods and services

• Registration

– valid for 10 years

– can be renewed for an unlimited number of 10-year periods

• To qualify for federal protection, a mark must:

– be distinctive: brand name that is unique and fabricated

– or have acquired a “secondary meaning”: an ordinary term has become a brand name

Trademarks

• 4 types of marks can be trademarked:– trademark Xerox, IBM– service mark United Airlines– certification mark“Florida” oranges– collective mark Boy Scouts of America

• Trademark infringement: unauthorized use of another’s mark, damages may be recovered

• Generic name: trademark that becomes a common term for a product or service– protection under federal law is lost– examples: yo yo, trampoline, escalator, linoleum, dry ice– Power Quality (a personal experience)

Employment and Labor Law

Federal Labor Law

Organizing A Union

Collective Bargaining

Strikes and Picketing

Worker’s Compensation Acts

Occupational Safety and Health Act

Social Security

Contracts

They provide the means for individuals and businesses to sell or otherwise transfer property, services, and other rights.

Without enforceable contracts, commerce would collapse.

Contracts are entered voluntarily. The terms become private law between parties.

Definition

A contract is an agreement that is enforceable by a court of law or equity.

A contract is a promise or a set of promise for the breach of which the law gives a remedy or the performance of which the law in some way recognizes a duty.

Contracts

Parties to a ContractOfferorOfferee

RequirementsElements

Agreement, Consideration, Contractual Capacity, Lawful ObjectDefenses to the Enforcement of A Contract

Genuineness, Writing and Form

Sources of a Contract LawCommon Law of ContractsUniform Commercial Code

ClassificationsBilateral and Unilateral

3.3.4 Workmanship a. The PCS shall be fabricated and assembled in a thoroughly workmanlike manner, and shall be free from blemishes, defects, burrs, sharp edges and foreign materials; and accurate in dimensions and alignment of parts.  

b. Assemblies and parts thereof shall be cleaned of smudges; loose, spattered or excess solder; metal chips and mold release agents; or any other foreign material which might detract from the intended operation, function or appearance. 

c. Screws, nuts and bolts shall show no evidence of cross threading, mutilation, or detrimental or hazardous burrs, and shall conform to the specified type and tightness or torquing.  

d. Wires and cables shall be positioned or protected to avoid contact with rough or irregular surfaces and sharp edges to avoid damage to insulation, conductors, or adjacent parts.  

e. Shielding on wires and cables shall be secured in a manner to prevent contact or shorting of exposed current-carrying parts. The ends of shielding or braid shall be secured to prevent fraying. 

f. Harnesses and cable containment shall be neat in appearance, uniformly applied and positioned to retain critical form factors and breakout locations. The containment means shall not cause the wire or cable insulation to deform so that performance characteristics are adversely affected.  

The Technical/Legal Language

Maintaining Perspective on Liability MinimizationEngineering and the Law

The greatest mistake you can make in professional life is to be continually fearing you will make one. One needs to take risks. Calculated (if possible), responsibly ..

Plausible reasons have never been lacking for putting off all merely cultural activities until some imminent danger has been averted or some crying injustice put right. But humanity long ago chose to neglect those plausible reasons. They wanted knowledge and beauty now, and would not wait for the suitable moment that never comes. The insects have chosen a different line: they have sought first the material welfare and security of the hive, and presumably they have their reward.

[People] are different. They propound mathematical theorems in beleaguered cities, conduct metaphysical arguments in condemned cells, make jokes on scaffolds, discuss the last new poem while advancing to the walls of Quebec. This is not panache: it is our nature. . . .

CS Lewis

In other others, do not be let your concern with liability become your greatest liability.

In Summary

1 - When short of data keep your mind open and your mouth shut. Question!

2 – Let your creative, imagination and technical skills lead you to an exciting professional career. Engineering is the way to get “from a garden to a city.”

3 – Do it well, carefully, responsibly …

4 - Document all your work clearly …

5 – Remember: Never To ENRON It…

6 – Keep yourself well informed of the non-engineering issues related to your projects. Engineering projects do not happen in a purely technical background.

7 – Remember the Design Norms: Cultural Appropriateness, Openness and Communication, Stewardship: efficiency and sustainability, Harmony, Justice, Care and love, and Trust … - Engineers are Moral Agents!

And you will have little to fear from the Law. Be aware of politics and personal interests.

Quiz ENGR340 Name: ______________________

1 – Fudging performance numberss) Negligence t) Fraud u)Breach

2 – Failure to check specification requirements f) Breach g) Fraud h) Negligence

3 – Missed report deadlinee) Negligence f) Fraud g)Breach

4 – To increase Liability h) Document All i) Shred Everything j)Review

5 – To Control Damagep) Alter Docs r) Propose mutually Beneficial Solution

s) Let the Press Investigate

(use a pen – no pencil)

Quiz ENGR340 Name: ______________________

1 –

2 –

3 –

4 –

5 –

Just Do It!

Quiz ENGR340 Name: ______________________

1 – t

2 – h

3 – g

4 – i

5 – r

Just Do It – RIGHT ! - Now Grade It. Be Aware of Fraud!