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Boeing has won an $11 million judgement against MD Helicopters Inc. (MDHI) over the rights to its AH-6i Light Attack Reconnaissance helicopter, with an arbitration panel ruling that the aerospace giant owns the intellectual property and right to produce the type, and that MDHI must stop interfering with Boeing’s attempts to do so.
The action was the latest in the two companies’ ongoing dispute into the legacy of a 2005 agreement, in which MDHI sold Boeing ownership of the underlying intellectual property needed to build the Mission Enhanced Little Bird (based on the MD 530F) – and the right to make and sell any aircraft derived from it. The Mission Enhanced Little Bird (MELB), also known as the AH-6M, was created in the 1990s as a vehicle for U.S. Army Special Forces. It enhanced the mission performance of the AH-6 Little Bird by adding components from the more powerful 600N to the MD 500 series airframe.
The panel was asked to resolve two primary issues: if Boeing has the right to make and sell the AH-6i Little Bird, and whether Boeing must disclose all improvements it has made to the Mission Enhanced Little Bird (MELB) to MDHI.
Finding in Boeing’s favor, the panel decided that the AH-6i was directly derived from the MELB. In addition to making MDHI pay Boeing’s $4.2 million arbitration costs (and its own $7.4 million costs), the arbitrators ordered the OEM to provide Boeing with all MELB tooling, one set of common tooling, and one set of tooling drawings by April 30.
The arbitration panel also denied MDHI’s counterclaims for an order to force Boeing to share its improvements to the MELB, and for $9.36 million in damages to cover MDHI’s costs in developing substitute technology to compete in the marketplace.
The neighboring companies, who have facilities across the street from each other in Mesa, Arizona, share substantial history. Boeing briefly owned the entity that ultimately became MDHI after merging with McDonnel Douglas in 1997, but decided to sell its commercial helicopter lines in 1999 to a Dutch holding company. That helicopter company was then purchased by Patriarch Partners in 2005, and recapitalized as MDHI.
Around this time, Boeing and MDHI made the agreement that would allow Boeing to pitch the MELB for the U.S. Army’s Advanced Reconnaissance Helicopter (ARH) program, in exchange for $15 million, a $10 million loan, and the restructuring of previous debt. However, the contract went to Bell, before the program was ultimately cancelled in 2008.
Despite the setback, Boeing worked on a new helicopter intended for sales to foreign governments – the AH-6i – and signed agreements with MDHI in 2010 and 2011 that would see the latter supply the airframes for the aircraft if Boeing secured orders.
MDHI also continued to sell armed helicopters to military customers around the world, and unveiled the MD 540F in 2012, presenting it as a contender for the Army’s Armed Aerial Scout (AAS) competition. Boeing, which was submitting the AH-6i for the same competition, claimed that the MD 540F’s development violated the 2005 agreement because it was derived from the MELB. The issue went to arbitration, with the ruling going in MDHI’s favor – the manufacturer was entitled to make and sell the MD 540F because it wasn’t derived from the MELB. The ruling was a crucial win for MDHI, ensuring it could compete for future U.S. and foreign military contracts.
However, the legacy of the 2005 agreement was soon felt again, after Boeing won a contract from the Saudi Arabian National Guard for 24 AH-6i helicopters in 2012. As part of the 2011 agreement between MDHI and Boeing, MDHI was to supply Boeing with the airframes for the aircraft, as well as other parts.