Stealth Boat the U.S. Government Won't Buy or Let Be Sold Abroad

http://www.bloomberg.com/news/articles/2016-10-19/the-feds-won-t-buy-this-19-million-stealth-boat-or-let-it-be-sold-abroad?utm_content=business&cmpid=socialflow-twitter-business&utm_campaign=socialflow-organic&utm_source=twitter&utm_medium=social

by JimmyAustin • 10 years ago

169 125 10 years ago

bloomberg.com

nyolfen• 10 years ago

an interesting conundrum: if you make something deemed too dangerous to be sold abroad, is the government obligated to buy it from you?

pervycreeper• 10 years ago

Why would they be?

icebraining4• 10 years ago

Well, in some way, aren't they partially seizing some of your property rights, and hence subject to the takings clause of the Fifth Amendment? I mean, sure, they aren't actually using it, but property is about control, not use.

sirmike_• 10 years ago

Because it has effectively become the government's property. What else would you call it? If they control where it goes, who can look at it, how many can exist or be built. Those and many more are property rights. US Govt needs to pay up seeing as this is a fully mature platform. If it was just some drawings on paper then they wouldn't owe a dime.

jonathankoren2• 10 years ago

First, a single prototype isn't a mature platform.

Second, what makes drawings suddenly less worthy of compensation than a single prototype? Don't they have value?

Third, it's not like the rules suddenly changed here. He knew the rules going in, and he built something he couldn't sell. That's a failure to find a market. Your idea opens up a scam of building impractical, yet dangerous weapons for government compensation.

hiharryhere• 10 years ago

Say you make a new kind of drug, the government is allowed to regulate it and prevent you from selling it. That doesn't oblige the government to compensate you for making something dangerous.

Too2• 10 years ago

Replace "boat" with nuke and the argument starts to sound ridiculous. If I happen to find some plutonium in my backyard and build an improvised WOMD in my garage i dont expect the government to be obliged to sign a contract for buying 100s of them. Nor do I expect to be able to sell them to Isis, Japan, my neighbor or whoever else is ready to pay. In fact I would expect to be thrown into jail without even seeing court.

geezerjay2• 10 years ago

Because it has effectively become the government's property. What else would you call it?

Danegeld.

slavik81• 10 years ago

This is basically the fear of every defense company with any presence in the United States. It's well known within the industry that you can get screwed like this.

The Navy and the U.S. Department of Justice declined to comment.

ITAR decisions are made by the State Department. Why not ask them?

dkopi3• 10 years ago

If you support export controls for security reasons, this is kind of inevitable.

The government shouldn't be forced to buy any type of military technology someone creates. But even if the government won't buy your tech, it still can be dangerous in the hands of other countries.

One could argue that if the government is preventing you from selling your tech abroad - there should be some sort of compensation for this. Others could argue that's just the cost of being in the business of weapons manufacturing.

icebraining4• 10 years ago

There is a process for compensation: https://www.law.cornell.edu/uscode/text/35/183

According to the article, it simply rarely pays up; it's a shame they don't go more into why.

cmdrfred• 10 years ago

Development is the risk involved in that business no? After you have a contract you are guaranteed to sell a certain number of units and the risk disappears. Seems like a good way to private the gains and socialize the losses.

pmorici3• 10 years ago

An inventor in that position doesn't have any negotiating power that's the why.

Animats2• 10 years ago

The Government never pays out on 28 USC 1498 claims (Government infringement of a patent) either. I once filed FOIA requests to get data on this.[1] The administrative claim procedure is useless. You have to file suit in the Court of Claims to collect.

One reason for this turns out to be that if the agency settles, it comes out of their budget, but if the agency loses in the Court of Claims, it comes out of a separate Treasury fund for claims against the Government.

[1] http://www.animats.com/foia/index.html

syshum10• 10 years ago

One should argue that being prohibited from talking about your technology is a 1st amendment violation, and if we are to have the concept of "Intellectual property" then the government banning you from selling it would be a 5th amendment violation with out just compensation.,

However given that the constitution is widely ignored by the US government today, with full support of the court system, it is unlikely that the constitution will protect anyone.

tombone12• 10 years ago

The government awards him both the patent and the intellectual property, the latter not being defined by the constitution.

thaumasiotes• 10 years ago

Others could argue that's just the cost of being in the business of weapons manufacturing.

Well, sure, you could argue that, but that argument justifies every rule that exists now or might in the future.

dkopi3• 10 years ago

Not really. Military grade weapons are a big deal. They're used to kill people.

Export controls are there to prevent killing machines getting in the hands of a countries enemies (or potential enemies in the future)

Houshalter3• 10 years ago

In the past it was illegal to export cryptography, which lead to some ridiculous situations. I once found an export restriction that says it's illegal to export neural network technology (or at least if it's applied to ASICs or FPGAs.) I doubt many people in the industry are familiar with this. Now that Google is starting to produce NN ASICs and Intel is building NN instructions into its chips, this is a serious concern.

thrownawy987• 10 years ago

Indeed it is illegal to export a "Neural network integrated circuit" without a license, Commerce Control List (CCL) section 3A001.a.9.

Reasons cited for control: NS (National Security), MT (Missile Technology), AT (Anti-terror).

b2600• 10 years ago

Export regulations have been relaxed since 1996 in the U.S. but export is still regulated and may require review and license from Department of Commerce's Bureau of Industry and Security.

toomanybeersies4• 10 years ago

Argh, export controls.

I wanted to buy a new rifle stock from the USA, but apparently since it's over US$100, it's a controlled export (firearm component). It's a damn piece of timber with a couple of holes in it!

Apparently I'd need an export certificate to get it out of the USA, which of course requires stacks of paperwork. No issues getting it into New Zealand though, no restrictions at all (I think magazines and receivers are the only parts that require import certificates).

syshum10• 10 years ago

> For now, Sancoff has decided to stop filing patent applications altogether. "We're afraid the government will come in and put more secrecy orders on us," he says.

I see this as a good thing.... IMO the protection patents provide are over rated in the first place (unless your a patent troll) for companies that are actually making something.

Of course it will not stop the State Dept from using ITAR to kill your business.

Senator Kelly Ayotte (R-N.H.) has weighed in on Sancoff’s behalf.“It doesn’t seem right for the U.S. government

What does not seem right is the US government can issue secrecy orders in the first place... That is what does not seem right. That seems like a clear 1st amendment violation to me.

basicplus22• 10 years ago

Looking at all the videos nobody needs to see a patent to build it anyway

achievingApathy2• 10 years ago

You're confusing patents with trade secrets. Most anything can be reverse engineered, doesn't mean I am legally able to start reproducing and selling it.

basicplus22• 10 years ago

Given the article states...

"the government served Sancoff with secrecy orders, which meant he wasn’t allowed to show the patents.....to anyone"

This pretty much makes the patents a trade secret now..

MichaelBurge3• 10 years ago

He can't do anything about the existing IP. But in the future, is it worth assigning the IP to a foreign holding corporation and applying for a foreign patent in a country with patent-respecting treaties with the US?

They can't order an Icelandic company to do anything, even if it happens to have American shareholders. And even if manufacturing is done in the US, the most they could do is seize the ships, and there are stronger protections for that.

icebraining4• 10 years ago

Wouldn't that kill their chances to sell it to the US Navy, which they were hoping to do initially?

MichaelBurge3• 10 years ago

I don't know the military purchasing requirements, but it might be that there's no way to get around it using shell companies.

The State department handles this, right? I suppose that's why defense companies like Lockheed Martin donate a lot of money to certain political campaigns.

caf• 10 years ago

The USMC was able to buy Harriers, I don't think a foreign supplier is out of the question.

azernik• 10 years ago

If they're in any way sending information about these technologies abroad (e.g. to Icelandic patent authorities) they're violating ITAR.

These regulations were written by very smart lawyers specifically to avoid any clever hacks (aka loopholes) like this.

syshum10• 10 years ago

They simply publish them to a book, and send the book....

ITAR is unconstitutional on its face, sadly the courts have upheld it.

Phil Zimmermann and MIT Press showed everyone how to get around ITAR, 1st amendment trumps all

Information should be free....

cnvogel2• 10 years ago

But in the future, is it worth assigning the IP to a foreign holding corporation

But this would make the US-American individual coming up with the ideas (the "intellectual property") export it to a foreign nation. Which is exactly what currently seems to be prohibited by putting a secrecy order on the patents.

They can't order an Icelandic company to do anything, even if it happens to have American shareholders.

This company then better not employ any American engineers.

jonathankoren2• 10 years ago

He can't do anything about the existing IP. But in the future, is it worth assigning the IP to a foreign holding corporation

That would be an export.

MrQuincle3• 10 years ago

If someone creates a dangerous army of robots, or a dangerous biological weapon on American soil I hope your government destroys it.

Compensation sounds ridiculous.

toomanybeersies4• 10 years ago

It's a false equivalence. Especially since the stealth isn't the only technology that they've developed, there's also the supercavitating pontoons (I guess they're pontoons), which would have an application for civilian watercraft as well.

MrQuincle3• 10 years ago

I'm not saying that it is as dangerous as the things I mention. It is the US government that deems it too dangerous (forbidding it to be sold to other nations).

In Holland there was a strain of bird flu created. I would have not been opposed to the government stepping in.

Nuclear proliferation is another obvious example.

You state that there are civilian applications. I would say that that is irrelevant. :-) I don't even know how to start addressing that argument. Is it okay to develop potential dangerous tech as soon as you can earn money with it through civilian applications? And why is it not possible to destroy the stealth boat and keep the "supercavitating pontoons"? Is there some dark tech-karma that requires a bomb made for every pill?

crdb• 10 years ago

Is there a video of this boat in real weather? That is, waves larger than the boat [1]. How does it cope without capsizing? Do its systems still work? Is propulsion retained if strong enough turbulence "breaks" the gas bubble around the floaters?

[1] e.g. https://www.youtube.com/watch?v=_dVkeh7wUm4 - the boat at the start is about the same size.

chris_overseas• 10 years ago

If this sort of treatment by the government isn't a reason to relocate to another more welcoming country, I don't know what is.

gonzo41• 10 years ago

Better make sure that country is a proper friend. If you take stealth tech to somewhere like china you can expect a noose if you decide to come back.

cnvogel2• 10 years ago

Is it just me, or does $19M sound ridiculously low for building a prototype of a military vessel?

Most larger yachts that are built for rich people seems to cost around this ballpark, and for them I would expect that no new technology has to be integrated from scratch, in to the core design (as in: motors, geometry of the hull). Exceptionally ugly boats, like Venus built for the late Steve Jobs claim to cost $100M!.

With a innovative new concept, I expect a lot of individual systems to be prototyped, scrapped, reworked. Let alone the effort needed for designing this thing. This is a startup with 20 People (17 of them now being layed off) operating for several years building a SHIP.

Anyone having numbers for typical effort/money/time/headcount spent in designing and building novel boats?

madaxe_again2• 10 years ago

Sure. My mother and her partner had a 70' motor catamaran built in Chile.

Custom job - designed by marine architect and customer. Custom hull, and mostly off the shelf running gear, big Cummins in each hull etc. Passagemaker, goes anywhere other than ice pack, huge range - they did a Pacific crossing a few years back without a refuel.

It took a team of 20 on/off (they work on a dozen or so boats concurrently), lots of calls and meetings, and cost about $2.5m all said and done. One would assume the shipbuilder made a decent profit. IIRC it didn't require much tweaking after sea trials.

The materials tend to be the cheap bit, it's skilled labour and design that costs you.

semi-extrinsic• 10 years ago

Well, the cost to an employer of 20 qualified engineers working for 3 years should be at least $10M. So you've spent >50% of that budget on just payroll + employee overhead.

So we have $9M left. There's a pair of 2000 shp turboshaft engines, something like the GE T700, costing around $2M total. Probably another $2M on drives and supercavitating propellers. Then there's all sorts of other equipment like radar, navigation, hydraulics etc. with $5M left. So I'm not sure it's entirely unreasonable.

But probably they're reporting a cost that's representative of what these would cost if someone went and ordered 10 of them.

rahrahrah• 10 years ago

Sure, if you got everything right on first try.

gaius3• 10 years ago

Is it just me, or does $19M sound ridiculously low for building a prototype of a military vessel?

Only because you've been desensitized by years of F35 budget overruns.

dsfyu404ed2• 10 years ago

You underestimate the amount of markup that goes into a yacht. Most of that is in the interior and other stuff the occupants will see. This boat is a fraction of the size and likely got its entire interior from a government auction.

Without all the BigCo overhead you can build single prototypes with much less money.

madaxe_again2• 10 years ago

There's a very simple explanation for their behaviour, and the "yes you can/no you can't" approach.

They already have a contract for similar with one of the regulars - Northrop or Lockheed or whoever. The project isn't going too well but they're not about to concede defeat, although they came close a few years back. Once in production they'll want US allies to buy from the same supplier for interoperability and profitability reasons, so will block the sale of the "wrong" product.

I mean, it's the only rational explanation - otherwise it'd be a no brainier to buy his boat.

hudibras2• 10 years ago

In that case, it would be a no-brainer for the Big Defense Contractor to buy him out...which leads me to believe that the BDC has a better version already and doesn't need this guy's model. So he's in a tough situation where he's designed something that's better* than anyone else's in the world, except for his direct U.S. competition.

*According to this one guy, who owns the company, by the way.

etrevino• 10 years ago

In that case, it would be a no-brainer for the Big Defense Contractor to buy him out...which leads me to believe that the BDC has a better version already and doesn't need this guy's model. So he's in a tough situation where he's designed something that's better* than anyone else's in the world, except for his direct U.S. competition.

This is very likely a big part of this guy's problem. Either the tech isn't as good as advertised or he's unwilling to sell. Maybe he doesn't think he'll get fair value, I don't know. Now, one could argue that it's unfair that we have a system that forces the little guy to sell out to the big guy, but that's a different argument.

usefulcat• 10 years ago

Or maybe they don't see a use for it?

jfoutz• 10 years ago

Cynical me says why not sell it to Blackwater or Xi or whatever they call themselves today? Heck, get in touch with a drug cartel, have them set up a US corporation to buy the thing and walk away.

Alternatively, leave the boat and move to one of those countries and set up shop there.

I think the real lesson to be learned, never do spec work.

jeff_petersen2• 10 years ago

Heck, get in touch with a drug cartel, have them set up a US corporation to buy the thing and walk away.
Alternatively, leave the boat and move to one of those countries and set up shop there.

While this might allow them to sell the boat to somebody it might also get them in trouble if they ever plan on coming back to the US.

TheSpiceIsLife• 10 years ago

I'm surprised someone hasn't yet come up with the "tech solution" to this problem.

One way out of this for Sancoff is to have The Russians™ hack his computer system and "steal" all his secrets, they'd have to pay in Bitcoin or that other one that launched yesterday, what was it? Zcash.

Also, he could sell the rights to the movie in a couple of years. From his Russian hideout.

xupybd• 10 years ago

Why not move the company overseas?

transfire• 10 years ago

Pentagon is notorious for steeling other people's inventions under secrecy laws. They probably already have some big defense contractor building exact replicas of his boat in secret right now.

stillworks• 10 years ago

In theory, couldn't their market be commercial rather than just defense/government ? Couldn't the propulsion system still be built for a non-radar deflecting passenger/payload structure on the top ?

Or their goal from get go was to be able to become a defense contractor/supplier ?

[EDIT]:Just saw the video again. The primary goal indeed is to cater to the defense segment.

Kenji2• 10 years ago

Just take all documents, move to China or Russia and build a ton of these. That'd make the US think twice about messing with inventors.

tomohawk4• 10 years ago

I wonder what would happen if they put all the specs on a private server in the basement and some hacker broke in...

Kenji2• 10 years ago

Hahaha, I see what you did there. That kind of behaviour only works out for the political class that is above the law.

rasz_pl• 10 years ago

Ask Gerald Bull how that works.

jeff_petersen2• 10 years ago

Really well until the enemies of your clients decide to off you?

I find the Gerald Bull story fascinating, definitely worth reading for anyone unfamiliar with it.

tomohawk4• 10 years ago

This reminds me of the Sea Shadow:

https://en.wikipedia.org/wiki/Sea_Shadow_(IX-529)

The rumor was that the Navy didn't like it because the crew size was too small and no officer would want to be in charge of it as it would impact promotability. Also, Lokheed was not a traditional Navy supplier.

Congress didn't like it because it was too cheap. The best way to secure funding is to make it large and complex and involve as many congressional districts as possible.

anindha• 10 years ago

I wonder if a drone version would have been more successful.

drivingmenuts• 10 years ago

The best way to secure funding is to make it large and complex and involve as many congressional districts as possible.

Proof that Congress, as a whole, is as corrupt as we usually think it is.

roywiggins• 10 years ago

There's nothing inherently corrupt about trying to bring government jobs to your district. I guess you could call it vote buying, but EVERYTHING can be construed that way- lowering taxes, increasing expenditures, etc.

Perverse incentives, sure. A poor use of funds, yes. Corruption, not really.

nradov• 10 years ago

That rumor is silly nonsense. The Navy continues to operate small vessels, and commanding one doesn't impact promotability (unless the skipper runs his boat aground or something). The Sea Shadow was always intended as a one-off experiment. Some of the technology was successfully used in later designs for larger ships. Lockheed has been a major Navy defense contractor for decades.

Someone• 10 years ago

It may be invisible to radar, but with all those bubbles and that in my eyes enormous (for its size) wake (glanced from the video at http://www.bloomberg.com/news/articles/2014-08-21/juliet-mar...), how stealthy can this thing be?

analognoise2• 10 years ago

Cavitating structures produce huge sonar returns, I think this boat's 'stealth' is greatly exaggerated.

danielmorozoff• 10 years ago

Exactly - great you can't see it on radar, but you can hear it from 50km away.

I guess anti-air applications you can imagine this should be fine.

analognoise2• 10 years ago

Helicopters can drop sonobouys.

Also, after watching the video, it doesn't even look like it presents a closed Faraday volume through the windshield (there's usually a wire mesh with a specific transimpedance measured with conformal antennas). It looks like somebody made an angular catamaran, slapped "stealth" on it, and is surprised they don't get an exemption as an arms manufacturer and that the Navy isn't interested in their design.

LO is hard work - the compute time and LO stack up costs way more than the 15 million. And did this company take a scale model and do a full LO radar test out to 40GHz? Did they do field trials?

Some people actually DO that work, and it's hard and expensive. You can't just slap 'stealth' on things. I mean even the coating lifetime in production volumes in a sea-salt atmosphere is, by itself, a serious problem. Just... Ugh.

M_Grey2• 10 years ago

I'd guess that he thought, "RADAR stealthy", and just ignored the fact that you could hear it coming miles away.

hudibras2• 10 years ago

“If the U.S. doesn’t want this, fine. But why not let us sell to friendly nations? We’ve had so much interest from countries like Japan, Korea, Qatar.”

My guess is that he's blowing smoke on both the capabilities of the ship and the interest from other countries.

gruez• 10 years ago

How so?

Retric• 10 years ago

Aircraft generally beat boats in an offensive role. The advantage boats have is the amount of stuff they can take with them. This loses out on the benefits of boats without any real clear benefit over aircraft.

M_Grey2• 10 years ago

He's certainly blowing smoke on the stealth capabilities, given the racket this thing will produce in the water.

usrusr• 10 years ago

Quite likely. Describing it as an "attack helicopter of the sea" sounds a lot like a hand-wavey excuse for not really having a clear idea what naval role the technology would actually fill.

Just demilitarize the thing and sell as a billionaire's toy for the confidential getaway from the swimming Versailles of a superyacht you already have. "The dinghy? Yeah, it was so advanced the Navy did not know what to do with it so I got it on the cheap", I imagine it would make a great conversation piece.

Edit: I might be basing my mental model of billionaires too much on the writings of Neil Stephenson though..

geezerjay2• 10 years ago

Quite likely. Describing it as an "attack helicopter of the sea" sounds a lot like a hand-wavey excuse for not really having a clear idea what naval role the technology would actually fill.

That sounds about right.

I would also add that it may indicate that it has a very limited payload capability and very limited speed for its size. The Juliet Marine Systems' marketing brochure mention their Ghost achieves speeds above 30 knots, which in practice indicate that its top speed is 30 knots. That's the speed of a Zumwalt-class destroyer.

Meanwhile, the US Navy's littoral class ships have a top speed that goes above 50 knots, and the US navy has an assortment of small fast-attack crafts whose speed reaches 80 knots.

In fact, fast attack boats designed decades ago typically reach speeds above 40, and nowadays there are several military transport ships that reach higher speeds.

dba7dba• 10 years ago

I'm note sure Korea/Japan really has interest in such patrol crafts. Pricey for what it offers.

Qatar? Maybe since they have oil money.

tokai• 10 years ago

Why would you ever use a boat for stealth? Wouldn't a submarine do a better job in every situation? If speed is needed a plane could do the job faster (and stealthier?) than a boat.

gaius3• 10 years ago

Littoral warfare is very fashionable right now.

dsfyu404ed2• 10 years ago

Stealth != invisible.

Stealth means you show up on radar like a 15ft skiff (in the case of a ship) or a seagull (in the case of aircraft)

trhway• 10 years ago

Stealth means you show up on radar like a 15ft skiff (in the case of a ship) or a seagull (in the case of aircraft)

a seagull flying at Mach 1+ :) ... I know, i know, it is about distance you can detect the "seagull" from, not about classification.

microcolonel• 10 years ago

Should've gone straight to SOFEX and offered it as a "commercial" platform. USG only wants anything if it's built by Raytheon, GD, or Lockheed-Martin.

s_q_b• 10 years ago

Drones are easier to sell.

mungoid• 10 years ago

I'm willing to bet its more because other defense contractors that have a longer history with the government want them to buy their much more expensive equipment than some new company that isn't 'in' with the decision makers. I'm positive something this cheap would surely shake up the standard thats been going on far too long.

njharman• 10 years ago

Sounds like they gambled, build military tech without contract, and lost.

Now they want taxpayers to pay for their failed bet.

Animats2• 10 years ago

There are a few documented Government-suppressed inventions. One is Airadar.[1] This was a radar unit for light aircraft. It had a conformal antenna in the wing (the aircraft nose being occupied by the engine), phased-array scanning with no moving parts, and was much lighter than moving-dish radars. In 1973. The inventor came from a long career in avionics, and in retirement, developed this. It worked fine, was installed in an airplane, and was reviewed favorably in Flying Magazine.

This really bothered the USAF, because it was way ahead of military radars of the time. So there was a patent secrecy order, and Airadar disappeared. It was decades before such radars became common.

[1] https://books.google.com/books?id=NWzlTqj0gQ4C&pg=PA66

bdamm• 10 years ago

That is noteworthy and repulsive. To think, the safety of the flying public was sacrificed because of the military's glacial pace.

javiramos• 10 years ago

Another example I am familiar with is NoblePeak Vision's shortwave infrared sensor technology which was prohibited from export.

totalZero• 10 years ago

Lame. USAF should know better.

Smart organizations co-opt innovation if it surpasses their own knowledge and technology.

elcct• 10 years ago

Make it autonomous and you get quite nice illegal goods transportation machine.

rxbudian• 10 years ago

That's probably how the established companies that sell military equipment keep their edge. Influence decision makers to not buy equipment from a company who built a revolutionary equipment and strangle them with so much restriction, then wait until it shriveled to almost nothing and desperate for a buyer, buy the technology patents at a bargain and build another one under their own names that will be approved by the same decision makers and bill them exorbitant prices for each. I hope the ones that got laid off, get hired quickly.

Stealth Boat the U.S. Government Won't Buy or Let Be Sold Abroad

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