The Stark Reality of Defense Contracting

In Iron Man 2, billionaire industrialist Tony Stark (Robert Downey Jr.) risks billion-dollar pieces of equipment to impress guests at a birthday party -- a big mistake for a defense contractor. After all, Stark's reckless debauchery provides the perfect pretext for the U.S. government to take away his Iron Man suit. Explosions, tattoos, and Scarlett Johansson notwithstanding, the disputes between Tony Stark and his antagonists revolve around ownership of the rights to the Iron Man technology. Iron Man 2 is the most expensive movie ever made about an intellectual property dispute.

Comic-book writer Stan Lee envisioned Iron Man as the quintessential figure of American capitalism, a member in good standing of the military-industrial complex who fought both the Viet Cong and the Soviet super-villain consortium Crimson Dynamo. If Lee's goal was to have Iron Man fight against a country that failed to recognize individual property rights, then Iron Man 2 ironically achieves that. Because while Stark does battle with an angry Russian, the biggest threat to his intellectual property is piracy by the United States government.

The intellectual-property issue is thrown into stark relief by the character of Ivan Vanko (Mickey Rourke), the son of a Soviet scientist named Anton Vanko. The elder Vanko claimed to have jointly created the technology behind the Iron Man suit with Tony Stark's father, giving Ivan some claim to the suit. Though Stark dismisses this claim, many of Russia's best inventors did face major challenges in reaping the benefits of their work due to the Soviet Union's obvious lack of individual intellectual-property protections. Mikhail Kalashnikov invented the AK-47 rifle, but he has never profited directly from the sale of nearly 100 million weapons. Similarly, Alexey Pazhitnov created Tetris, only to watch as the Soviet government sold the rights to Nintendo. Although both Kalashnikov and Pazhitnov managed to prosper in the end, the idea of the Brilliant Soviet Inventor who languishes in poverty is hardly outlandish.

In the United States, inventors are supposed to profit from their creations, as emphasized in the original comics. But Iron Man 2 takes a different tack. While trying to fend off Vanko, Stark is pressured by the U.S. government to give up the secrets of the Iron Man suit. After Stark refuses a senator's demand that he relinquish his body-armor technology, the government forcibly takes it from him, only to turn it over to a competitor that then uses the technology to fulfill its own defense contract. Consciously or no, this echoes the real world; the United States government can take such actions with almost total legal impunity.

In real life, most inventors aren't trying to "privatize peace." Many just want to get a government contract. Their inventions are kept as trade secrets, like the Iron Man suit, or they are patented. (In the film, Pepper Potts, played by Gwyneth Paltrow, demands action from "patent attorneys," but Stark Industries obviously hadn't patented the technology, or else the government would already have access to the information needed to reproduce the armor.) It is not unheard of for a potential contractor to provide the government with product specifications, only to then watch the government award the contract to a competitor that has suddenly and suspiciously generated remarkably similar technology. For example, Crater Corporation charged that Lucent Technologies improperly used its tennis-inspired coupler to fulfill a Defense Department contract.

These inventors theoretically have their own superpower at their disposal: the Fifth Amendment's "Takings Clause," which requires compensation for government appropriation. But it has one weakness: the military and state secrets privilege, which has been invoked with increasing frequency in the past 25 years. Perhaps most notably, it has been used to prevent suspected terrorists from obtaining access to incriminating information. Less well known is the role it has played in suppressing intellectual-property owners' attempts to recover compensation for government use of their innovations.

When invoking the military and state secrets privilege, the government claims that access to information about the military's use of technology would endanger national security. Faced with such concerns, courts could respond to this privilege by restricting public access, limiting the information to the parties but permitting the inventors to proceed with their legal claims.

Unfortunately, the courts have not done so. Instead, they have treated the privilege as legal Kryptonite, dismissing inventors' lawsuits. In Iron Man 2, Stark's competitor Hammer could have immediately begun production after acquiring the Iron Man suit, insisting that it had generated the technology itself. Had Stark sued, the government could have claimed state-secrets privilege, protecting details of the contract and production design from Stark's lawyers. Stark would have been left without recourse to obtain the evidence needed to prove his case. However, when the developer of such trade secrets is a well-connected defense contractor like Stark, institutional relationships with the Pentagon will tend to protect its interests. Which is why those who suffer this type of abuse are not suave billionaires but small companies or even individual inventors.

Despite the government's legal abuse of them, the Department of Defense contends that it will need to rely on smaller businesses to help produce the next generation of advanced defense technology. Defense officials have long questioned the ability of the traditional U.S. defense industrial base to quickly and affordably provide necessary technology. Thanks to the length of the procurement process, by the time computing technology was created to military specifications, civilian computers often outperformed the military technology. Planners have started to look outside the traditional defense industry to furnish needed innovation and reduce costs. The uncompensated seizure of property directly conflicts with this goal.

Stark didn't need a monetary incentive to develop his technology. And presumably Stark, either individually or through his company, retained sufficient political pull to obtain compensation for that stolen technology without having to rely on the Takings Clause. Of course, he's just a fictional comic-book hero. But as audiences watch Senate efforts to persuade Tony Stark to relinquish Iron Man technology to the U.S. government, they should keep in mind that Stark's greatest power might not be his full-body armor but instead his company's political connections.