United States: Changes In Store For Safety Act Application

The Department of Homeland Security recently announced that it will soon be issuing changes to the Safety Act application forms and process. This is good news for companies hoping to avail themselves of the Safety Act's important protections.

For those who are not familiar, the Safety Act, whose proper name is the Support Anti-Terrorism by Fostering Effective Technologies Act of 2002 (6 U.S.C. §§ 441-444), provides risk and litigation management protections to certain sellers of antiterrorism technologies as well as to others in the seller's supply and/or distribution chain. The Safety Act was developed to address the concern that private sector manufacturers or sellers of antiterrorism technologies would be hesitant to develop and use technologies that could aid in preventing and/or responding to terrorism because of fear of liability if their products or services failed to function exactly as anticipated. 68 Fed. Reg. 59684 (Oct. 16, 2003) (supplementary information).

The Safety Act provides two levels of protection to eligible sellers of antiterrorism technologies. Technologies that meet requirements for the first level of protection receive "designation" status, which provides the seller with the following protections:

Liability and damage limitations (6 U.S.C. § 443(c));

• Federal court jurisdiction (6 U.S.C. § 442(a)(2));

• Prohibitions against joint and several liability for non-economic damages and against punitive damages and pre-judgment interest (6 U.S.C. § 442(b)); and

• Reduction in damages for any collateral source compensation (6 U.S.C. § 442(c)).

The second level of protection, called "certification," provides sellers of the technology with a rebuttable presumption that they are entitled to the benefits/immunities of the government contractor defense as set forth in Boyle v. United Technologies Corporation, 487 U.S. 500 (1988) (6 U.S.C. § 442). This protection immunizes the seller against claims for such things as design defects and failure to warn. This statutorily created version of the Government Contractor Defense will not be affected by subsequent Court decisions concerning the judicially created defense. Furthermore, the immunization applies in perpetuity so long as the actionable event took place during the term of the certification. (68 Fed. Reg. 59684)

The Department established a two-part process for applying for Safety Act protections. The first part of the process is the voluntary submission of a pre-application. (See 65 CFR 25.3; Department of Homeland Security Safety Act Application Kit (Oct. 2003)). This submission is to be reviewed by the Department and a preliminary opinion given within 21 days of submission. (Application Kit). The preliminary opinion will classify the technology as either "promising," "doubtful," or "uncertain." Id. This feedback is simply that -- this decision plays no role in the final decision, but provides only an opportunity for the applicant to learn from initial impressions and improve upon their application. The second step of the process is the submission of a completed application. This requires submission of all of the information included on the pre-application, as well as some additional information.

An interim rule implementing the Safety Act was published on October 16, 2003. As of June 2, 2004, 86 pre-applications and 18 applications had been submitted, and none had yet received a final decision from the Department. (Comments of Charles E. McQueary, PhD., "The Role of DHS Science and Technology in Protecting America," U.S. Chamber of Commerce Breakfast Meeting, June 4, 2004).

Concerns regarding the difficulty of the application have been widespread. Many of the complaints center on the length of the application. Initial estimates were 36 to 180 hours for completion of the application, but some companies claim it takes much longer. Similarly, complaints as to the detail and complexity of the information requested are common. For example, one question on the pre-application asks the applicant to "[i]ndicate the estimated potential magnitude of harm to the public if the technology were not deployed as an ATT and there was a terrorist attack." The applicant is asked to provide their answer in the categories of fatalities, injuries, economic losses, physical damage, mass disruption, and symbolic damage. The next question asks for "the percentage decrease" in this potential magnitude of harm in each of the above categories if the technology is deployed.

Other complaints focus not on the application itself, but on a process that sometimes seems much less interactive than was initially intended. Although the introductory comments to the interim regulations state "[t]he application process is interactive," (68 Fed. Reg. 59684), at least some companies have found that meaningful discussions during the process are difficult to come by. In addition, the pre-application, which was intended to provide the opportunity for early interaction and feedback so that the application could be improved, has been found more prone to cookie-cutter responses than focused direction.

Practitioners and the Department have expressed surprise at the small number of pre-applications and applications received in the eight months since the interim rule took effect. The small number of submissions may indicate that the forms and the process -- or at least the complaints about them -- deter companies from applying. Equally interesting is the number of full applications relative to the number of pre-applications submitted. While 84 companies had made it through the pre-application process as of June 2, 2004, only 18 had taken the next step of submitting a full application. McQueary Comments. This comparison is of note because it illustrates a surprisingly large group of companies that were interested and motivated enough to, at least partially, complete and submit the five-page pre-application, but decided after receiving feedback not to go forward with the full application. It may be that these companies are just taking their time in making needed changes in their submissions prior to moving on to the full application, but this number is certainly something to watch.

Companies and members of Congress have taken their concerns to the Department, and the result is promised simplification of the application and changes to the process. Specifics on the changes have not been given, but the changes are expected to be announced any day. Given the identified difficulties, it is hoped that the following changes will be included in the forthcoming improvements:

• Reconsider whether all of the information requested has truly been helpful in making a decision on Safety Act designation or certification. For information that is necessary, provide additional information on how it will be used to help applicants better direct their responses.

• Make the application more user friendly by providing clearer instructions and an opportunity for the applicant to provide open-ended responses.

• Informalize the process -- make a real effort to work with applicants and to publicize the availability of assistance.

• Provide more interaction and more feedback following the pre-application reviews. If the pre-application process is not going to provide anything more than a checklist for what is or is not included in the application, it should be skipped so that the review time is not wasted.

These changes can be implemented without compromising the need for diligence in ensuring that the Safety Act's protections are not afforded to companies or technologies that do not meet the requirements for this unique protection.

To its credit, the Department is working its way through uncharted territory in implementing the Safety Act. Both substantively and procedurally, it has had to start from scratch and implement the Safety Act under tight time constraints. For those applications received, the Department has stayed within the timeframes it set for application review. (The fact that none have been finally decided is not indicative of it letting deadlines slip; rather, it is indicative of a process that, even when followed by the book, will take several months for completion). Finally, notwithstanding the experiences of some individual applicants, the Department appears to have been responsive to general, constructive criticism of the process -- the upcoming changes and the Department's regular participation at public forums focusing on the Safety Act are evidence of that.

Those interested in applying for Safety Act protection eagerly await the changes. Real change however, should be seen not only in a less burdensome process for companies choosing to complete it, but also a greater number of companies attempting to secure it. Only when the Safety Act is seen as more of a benefit than a burden will we see the larger impacts in innovation and safety that the Act was meant to engender.