The Legal Framework
The Legal Framework
Should Engineering Students Really Care About Business Law?
Yes or No ?
Paulo F. Ribeiro, MBA, Ph.D., PE
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.
The danger of depending on
technology for societal
solutions is that technology is
usually divorced from those
What is an Engineer?
permanent principles of
A Thinker?
morality upon which all just
An "Action Figure?"
social/political solutions
An Organizer?
depend. For example, words
A Problem Solver?
like "justice," "virtue," "mercy"
What about "Human" problems?
and "duty," are terms without
What is a Manager?
meaning within the
Qualities of a Manager
technological framework. And
Communication Skills
so while technology is not
Handling People
necessarily evil, it can easily
Sense of Cost
become a tool for evil
Knowledge of the Law
because it has no firm
grounding in morality.
Law and Engineers
The engineer has the
Engineers Act as Agents of Owners
obligation to serve as a moral
Engineers deal with rights of others
Engineers responsible for contract documents agent.
Engineers may be mediators
Engineers Are Moral Agents
Some Fundamental Questions
Therefore, a knowledge of business law is essential!
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?
Liability: Incurring It
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.
Exposure To Liability – Testing Understanding
1. Participating in necessary conference and preliminary studies
Breach: contract promises X meetings, only had Y.
2. Interpreting physical restrictions as to the use of the land
Negligence: failed to allow for building set backs
3. Assisting in presentation of a project before bodies possessing
approval-disapproval power
Fraud: 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.
Liability: Examples of Failure and Lessons Learned
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
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.
Liability: Examples of Failure and Lessons Learned
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: Minimizing It
Insurance: Financial Protection
($$$$ - 61% claims paid – 10% settled out of court)
Preventive practices
Incorporate Practice
Limit 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 practices
Separate Facts and Opinions
Hire Only Insured Sub-Consultants
Respond In A timely Fashion
Limit Project Comments to Knowledgeable Persons
Avoid Financial Interest in Project (ENRON)
Use Peer Review (Team Work)
Do It Right The First Time
Sign Reports In Corporate Name Only
Communicate!!!!! With Those You Serve
Place Liability-Limiting Provision in Contracts
Application - Testing Understanding
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.
Intellectual Property
• Often a business’s most valuable asset
• Three types protected:
– patents
– copyrights
– trademarks and other marks
Intellectual Property
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.
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
http://www4.law.cornell.edu/uscode/
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.
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 Contract
Offeror
Offeree
Requirements
Elements
Agreement, Consideration, Contractual Capacity, Lawful Object
Defenses to the Enforcement of A Contract
Genuineness, Writing and Form
Sources of a Contract Law
Common Law of Contracts
Uniform Commercial Code
Classifications
Bilateral and Unilateral
The Technical/Legal Language
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.
Maintaining Perspective on Liability Minimization
Engineering 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: ______________________
(use a pen – no pencil)
1 – Fudging performance numbers
s) Negligence
t) Fraud
u)Breach
2 – Failure to check specification requirements
f) Breach
g) Fraud
h) Negligence
3 – Missed report deadline
e) Negligence
f) Fraud
g)Breach
4 – To increase Liability
h) Document All
i) Shred Everything
j)Review
5 – To Control Damage
p) Alter Docs
r) Propose mutually Beneficial Solution
s) Let the Press Investigate
Quiz ENGR340
 Just Do It!
1–
2–
3–
4–
5–
Name: ______________________
Quiz ENGR340
Name: ______________________
 Just Do It – RIGHT ! - Now Grade It. Be Aware of Fraud!
1– t
2– h
3– g
4– i
5– r