Question
(redacted)
TRANSACTIONDESCRIPTION AND ANALYSIS
FACTS
Corporation A is, among other things, (i) theoriginal equipment manufacturer ("OEM") of systems for commercialaircraft (ii) the manufacturer and distributor of spare parts for such systemsand (iii) engaged in the maintenance, repair and overhaul ("MRO") ofsuch systems. Over the years, Corporation A has upgraded the systems, and thereare now several newer versions of the systems. Corporation A has determinedthat it no longer wants to be an MRO service provider for certain parts of anolder system (the "Older System") or be responsible for themanufacturing and distribution of certain OEM spare parts for the Older System..However, Corporation A wants users of the Older System to have access to an OEMauthorized MRO provider for those parts of the Older System and to be able toobtain OEM spare parts for those parts of the Older System, which will continueto be sold through Corporation A's parts catalog. Corporation A will remain anMRO service provider the other parts of the Older System and for the newersystems and will continue to manufacture and distribute OEM parts for the newersystems.
Corporation B is, among other things, an MRO serviceprovider for certain parts of systems manufactured by Corporation A, includingthe Older System, and of certain parts of systems manufactured by others.Corporation B would like to expand its MRO business and to become an OEMauthorized MRO service provider for certain parts of the Older System.Corporation B currently arranges for the manufacture of certain non-OEM partsfor the systems in connection with its MRO work, and Corporation B would alsobe willing to be responsible for the manufacturing and distribution of certainOEM parts of the Older System.
To accomplish the foregoing purposes, Corporation Awill designate Corporation B as the exclusive OEM authorized MRO serviceprovider for certain parts of the Older System. In connection with thedesignation, Corporation B will perform MRO services in accordance with thestandards of Corporation A, including the use of OEM parts and procedures, andwill receive the non-exclusive right to use certain intellectual property ofCorporation A dealing with the authorized MRO procedures. Corporation B willreceive a non-exclusive license to use Corporation A's trademark for the OlderSystem, which it may use in connection with its advertising for MRO services,and for the use of such trademark Corporation B will pay to Corporation A anamount equal to 4% of its gross revenue on MRO service work relating to certainparts of the Older System. In addition, Corporation B will purchase fromCorporation A certain contracts with certain customers to perform MRO servicesfor certain parts of the Older System, and Corporation B will purchase fromCorporation A its existing inventory of certain parts of the Older System thatcan be utilized with such customers. Corporation B currently utilizes thoseparts in the performance of its MRO work.
In connection with the assumption of responsibilityfor manufacture and distribution of OEM parts, Corporation B will purchase fromCorporation A its existing inventory of certain parts for the Older System thatare no longer in regular production, as well as tooling for making those parts.In addition, Corporation B will arrange for the manufacture of those parts inaccordance with the standards of Corporation A, and Corporation B will receivethe non-exclusive right to use certain intellectual property of Corporation Adealing with the manufacturing of those parts. Corporation B will also maintainan inventory of those parts for users of the Older System, which will be soldthrough Corporation A's parts catalog. Corporation B currently utilizes thoseparts in the performance of its MRO work.
Corporation A and Corporation B satisfy thesize-of-the-parties test. In connection with the transactions, Corporation Bwill not acquire any facilities of Corporation A or hire any employees ofCorporation A. The value of the contract rights, inventory and tooling to beacquired (all items other than the licenses) is less than $56.7 million.
QUESTION
Is any filing required under the Hart-Scott-RodinoAntitrust Improvements Act of 1976, as amended (the "Act"), inconnection with the transactions described above?
ANALYSIS
The acquisition of assets is reportable under the Actif the value of the assets is $56.7 million (the current threshold, subject toadjustment). For purposes of the Act, the acquisition of a license of atrademark or other intellectual property is not considered the acquisition ofan asset unless the license is exclusive. Here, the license of Corporation B touse the trademark is non-exclusive, and Corporation A will continue to use thetrademark in its business. In addition, the license to use intellectualproperty relating to MRO procedures is non-exclusive, and Corporation A willcontinue to provide such intellectual property to users of the Older System.Further, the license to use intellectual property relating to the manufacturingof OEM parts will continue to be used by Corporation A in its business.Therefore, the acquisition of the licenses described above do not constitutethe acquisition of an asset for purposes of the Act.
Inview of the foregoing, it is our understanding that the transactions describedabove would be exempt from the filing requirements under the Act.