Companies developing autonomous aerial vehicles face a complex web of regulatory requirements, national security responsibilities, IP considerations, and reputational challenges.
Fenwick’s Jon Lenzner and Noah Solowiejczyk recently sat down with Archer Aviation CLO Eric Lentell for an in-depth CLE session at the intersection of these diverse concerns, hosted by Corporate Counsel Business Journal. Here are the essential takeaways for companies looking to thrive while addressing risk.
The good news for aerial vehicle companies is that regulatory groundwork already exists. The Federal Aviation Administration and Department of Defense have been working for years to establish regulatory frameworks that accommodate technologies entering the market today. These agencies have built upon decades of work, including foundational research conducted at NASA that now underpins many commercial applications.
But the current National Airspace System (NAS) operates on outdated infrastructure that creates bottlenecks for innovation. Companies need to be able to layer apps and infrastructure onto the NAS that can help air-traffic controllers mediate an unprecedented level of activity.
Companies should engage early and continuously with regulators. This proactive approach ensures smoother integration when technologies reach deployment phase.
The federal government has elevated export controls and sanctions enforcement to a national security imperative. Officials view this regulatory area through the lens of protecting American technological leadership from foreign adversaries who seek to access critical innovations through various circumvention schemes.
Recent enforcement actions demonstrate the severe consequences of violations. Companies that fail to recognize red flags indicating their technology is being diverted to parties on the U.S. Department of Commerce’s Entity List through front companies face substantial penalties, including potential felony guilty pleas and combined financial penalties exceeding hundreds of millions of dollars. These severe penalties often stem from companies failing to conduct adequate due diligence, inadequate compliance, or ignoring warning signs.
Companies must implement robust know-your-customer procedures and conduct thorough due diligence on direct parties and potential end users. They should watch for red flags indicating front company schemes and consider voluntary disclosure to the government when violations are discovered. The challenge extends beyond traditional sales channels, as companies must also address risks from planted employees or contractors seeking to access sensitive technology directly from within organizations.
A particularly concerning development involves sophisticated schemes where foreign actors (including China and North Korea) infiltrate American companies through remote work arrangements. These operations have evolved from simple paycheck fraud to complex data-exfiltration and extortion schemes targeting U.S. companies across a wide swath of industries.
As threats have shifted toward data theft and extortion, bad actors have begun threatening to release stolen intellectual property unless companies pay ransom demands. The schemes often target engineering talent and focus on acquiring software solutions and algorithms that represent core competitive advantages for American companies.
Companies should enhance screening procedures for remote workers, implement monitoring technologies to detect unusual activities, and collaborate with industry partners on threat intelligence. Specialized service providers can help detect and prevent insider threat activities that traditional security measures might miss.
Rather than viewing government as an adversary, successful companies in this sector cultivate positive relationships with regulators. Building these relationships before any issues arise creates a foundation for productive collaboration when challenges emerge. Companies benefit from establishing trust and credibility with officials who understand their business models and compliance commitments.
These relationships provide mutual benefits for both parties. Companies gain insight into regulatory priorities and emerging threats, while government agencies access private sector innovation and threat intelligence. This collaboration creates a comprehensive mutual understanding of the challenges and opportunities that neither side could achieve independently.
Companies should engage proactively with federal, state, and local regulators through participation in industry working groups and task forces. They can offer briefings on new technologies and capabilities while maintaining regular communication channels with key officials. For smaller companies with limited government affairs budgets, strategic partnerships with established players can provide access to trusted relationships and regulatory guidance.
When regulatory scrutiny or enforcement actions arise, companies must move quickly to gather facts and coordinate responses. The initial phase requires rapid information collection to understand exactly what occurred before engaging with government officials. Companies that delay this fact-gathering process often find themselves at a disadvantage when explaining their situation to regulators.
Effective crisis response requires establishing rapid information-gathering protocols and creating secure communication channels for crisis teams. Teams should focus on collecting facts rather than drawing premature conclusions during initial response phases. Companies benefit from preparing digestible presentations for government discussions while coordinating across legal, regulatory, and communications teams.
Rather than relying on lengthy playbooks that prove unwieldy during actual crises, companies benefit more from having an established framework and system for navigating crisis, streamlined communication systems, and regular tabletop exercises. These preparations help teams respond effectively to various scenarios while maintaining coordination across distributed work environments.
The autonomous aerial vehicle sector represents a strategic competition between major powers, making compliance not just a legal requirement but a national security imperative. Companies that invest in robust compliance frameworks, government relationships, and crisis preparedness position themselves to capitalize on significant opportunities ahead.
Success requires viewing compliance as a competitive advantage rather than a burden. This perspective enables companies to move faster, scale more effectively, and contribute to American technological leadership in this critical sector. Companies that embrace this approach find themselves better positioned to navigate regulatory challenges while pursuing ambitious growth objectives in an increasingly complex operating environment.
See the full webinar at CCBJ.