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EXPORT CONTROLS AND PATENT PRACTICE
Intellectual Property Owners Association
2012 Annual Meeting
September 11, 2012
Larry E. Christensen
Miller & Chevalier Chartered
202-626-1469
Roth Case (2008)
• Univ. of Tennessee professor and employee of
Atmospheric Glow Technologies (university spin-off)
• Shared technical data about plasma actuators
(reduces drag on air drones) to Iranian and Chinese
national grad students; traveled to China with similar
technical data on laptop -- all without authorization
• Claimed that technical data was in the public domain;
rejected by jury
• Convicted to four years in prison
Export Control and Sanctions Developments
Reform will clarify control lists and benefit Garmin but Congress has slowed the process
Investigators target both export controls and corruption in same investigation
Justice Department has successfully obtained extradition of a British citizen to try him criminally in connection with a sting
Use of stings is now common place in export controls
Increased use of whistle blower strategies and charging of individuals in both FCPA and Export Controls and Sanctions
Tightening of commercial embargo Iran by U.S. and other nations to impose economic pressure to cause Iran to refrain from nuclear weaponry and weapons grade nuclear fuel
China and Iran remain the primary enforcement concerns
3
Export Control and Embargo Fines
ITAR
BAE (UK) (2010):
$400 million
Xe Services
(2010): $42 million
ITT (2007):
$128 million
United
Technologies
(2012) : $75
million
OFAC Barclays (2010):
$474 million
Lloyds (2009): $350
million
Credit Suisse (2009):
$536 million
ING (2012):
$619 million
ABN Amro (2005-10):
$580 million
EAR PPG (2010):
3.75 million
DHL (2009):
$9.5 million
Balli Aviation (2010):
$17 million
Carrington (2006):
$12.6 million
Ebara (2004):
$6.4 million
4
Export Licensing-Technology and Technical Data
• Export Administration Regulations (“EAR”),
International Traffic in Arms Regulations (“ITAR”),
and various embargo regulations of the Office of
Foreign Assets Control (“OFAC”).
• About 4% of the U.S. economy is subject to some
type of export license requirement.
• If you do not know the agency jurisdiction and
classification of the technology you export, you do
not know whether an export license is required, but
that is NOT a defense.
What Does this Have to Do with Me? I Prosecute Patents.
• Export Enforcement informs us they are concerned
about the export of unlicensed technical data for
foreign review by service firms.
• The national security and enforcement agencies are
concerned about the unlicensed export of design
technology.
• If you export technology without a license for the
reason that its costs too much to determine whether
you need an export license or deemed export
license, prosecutors will view that as a willful violation
if they can prove you need a license.
What Does this Have to Do with Me? I Prosecute Patents. (cont.)
• The FBI, Immigration and Customs Enforcement
(“ICE”), and Export Enforcement of BIS, and DOD
agencies investigate export control matters.
• There is no attorney exemption or defense.
• The deemed export rule applies to your employees in
the United States including server access.
• The deemed reexport rule applies to your non-U.S.
operations. (Does your Canadian service provider
hire an Iranian or Chinese employee?)
• An email or file transfer to another country is an
export.
What Does this Have to Do with Me? I Prosecute Patents. (cont.)
• The Intelligence Community spends resources to
identify unlicensed technology transfers.
• The Justice Department’s National Security Division
regularly uses the FISA court to authorize secret wire
taps for export control investigations.
• Your HR Department must submit signed I-129s to
the immigration authorities certifying that your
company does not have controlled technical data.
• The odds of getting caught are not insignificant.
Export Licensing-Technology and Technical Data
• Export Administration Regulations (“EAR”),
International Traffic in Arms Regulations (“ITAR”),
and various embargo regulations of the Office of
Foreign Assets Control (“OFAC”).
• About 4% of the U.S. economy is subject to some
type of export license requirement.
• If you do not know the agency jurisdiction and
classification of the technology you export, you do
not know whether an export license is required, but
that is NOT a defense.
Publicly Available Treatment
• Two distinct categories of Publicly Available and
Public Domain treatment are outside of the EAR and
the ITAR:
The PTO foreign filing license process
Other means to qualify
• A defense services approval is required from the
Directorate of Defense Trade Controls even IF
performed solely with public domain information.
PTO Obligations
• If export of controlled information is related to a patent
filing abroad, seek authority from PTO for foreign filing:
37 CFR § 5.11
BIS Advisory Letter, Jan. 11, 2006
PTO Obligations
• Must obtain authority from the PTO to export controlled
technology in the form of a patent application or
amendment, modification, or supplement
Must relate to the preparation, filing, or possible filing
and prosecution of a foreign patent application
Limited to information related to the filing; does not cover
other trade secrets typically held from publication by the
company or patent prosecutor
Does not authorize export of technical data for screening
to determine patent strategy versus trade secret strategy
License from BIS not required if the technology is
properly within the scope of a PTO filing application.
Drawing the Line Between Scope of PTO License Versus Trade Secrets Not Related to Filing
• Export or release of technology to a foreign service
provider is certainly not authorized before PTO issues
a license unless you qualify for one of the 6 elements
of publicly available technology.
• A PTO license is not available for trade secrets not
considered for filing in a foreign patent office.
• The PTO license is not a practical solution to the
export of large amounts of technology for general
review of the world patent record.
• Chief Counsel’s Office in Commerce takes a narrow
view of permitted scope of a PTO filing license.
Drawing the Line Between Scope of PTO License Versus Trade Secrets Not Related to Filing (cont.)
• BIS and PTO do not intend the PTO license to
authorized the wholesale export of technology for
general review of patentability. The PTO requires a
closer nexus to the filing of a foreign patent.
• The more practical solution is to perform conventional
jurisdiction and classification analysis before export or
release of technology as an integral part of an export
control and sanctions compliance program.
• All six publicly available options under the EAR are
available even if PTO does not issue a license.
Patent applications EAR 734.10
• information is entirely of foreign-origin technical data
and the patent application is being sent to a foreign
inventor to be executed and returned to the U.S. for
filing with PTO
• information is sent to a foreign country within six
months of U.S. patent filing in order to obtain
signature of inventor who was in the United States
when invention was made
• PTO approves U.S. patent application for foreign filing
• six months has elapsed since filing of U.S. patent
application
Fundamental principles (EAR publicly available) Non-PTO Publicly Available Treatment
• Outside the PTO filing license context, you need to qualify
for publicly available treatment under one method and not
all six methods
• You may use publicly available treatment for technology
published by someone else even if you charge a
substantial price for that data
• There are practical challenges in using the full scope of
publicly available treatment: Time to research and
employee resistance to characterizing work product as
publicly available
• Publicly available treatment remains at the heart of export
control policy under the EAR
Consequences of “publicly available” treatment
• None of the ten general prohibitions of the EAR apply to the
technology or software
• End use restrictions do not apply (beware the U.S. person
activity rule and jurisdiction over the person vs jurisdiction
over the technology)
• Denied person restrictions do not apply
• Embargo rules of the EAR do not apply (similar limits on
government authorities per the Berman Amendments to
IEEPA)
• Defense Service requirement of ITAR and services and
banking restrictions of Iran sanctions apply
PUBLICLY AVAILABLE TECHNOLOGY
EAR §§ 734.7 to 734.11 (six methods to quality)
• Published or in a library open to the public
• Available on the public record (patent office, copyright
office)
• Taught in a college or university catalogue course or
laboratory
• Fundamental research to be published
• Released or to be released at an open conference
• Given away at no more than the cost of reproduction and
distribution
PUBLICLY AVAILABLE SOFTWARE
• Given away at no more than the cost of reproduction and
distribution (including EI software in a paper book or other
printed material)
• Only method to qualify software other than publishing
the source code (See Q G(1))
• Exception to Publicly Available treatment:
EI-controlled software at ECCN 5D002 exporter other than in
a paper book or other printed material
Publicly available technology and software
(EAR Part 734)
• Already published or will be published 734.7
• Arising during or resulting from fundamental research 734.8
• Educational information 734.9
• Certain patent applications 734.10
• Given away at no more than the cost of reproduction and
distribution (including EI software in a paper book or other
printed material)
• Exception to Publicly Available treatment:
EI-controlled software at ECCN 5D002 exporter other than in
a paper book or other printed material
Published information 734.7(a)(1)
• “Published” and “generally accessible to the interested
public in any form, including:”
• Periodicals, books, print, electronic, or other media for
general distribution to any member of the public OR
• To “a community of persons interested in the subject
matter such as those in a scientific or engineering
discipline”
• Either free or at a price that does not exceed the cost
of reproduction and distribution
Information in libraries EAR 734.7(a)(2)
• “Published” and “generally accessible to the
interested public in any form, including:”
Available in libraries open to the public
Available in University libraries
Patents EAR 734.7(a)(3)
• “Published” and “generally accessible to the
interested public in any form, including:”
• Patents, and
• Open “published” patent applications
• Each available at any patent office
• Includes only that which is on the public record
• Does not include information withheld by the patent
prosecutor or patent office
• Includes information available in foreign patent offices
Release at open conference EAR 734.7(a)(4)
• “Published” and “generally accessible to the
interested public in any form, including:”
• Open conference
• Meeting
• Seminar
• Trade show
• Other open gathering
“Open” EAR 734.7(a)(4)(i) and (ii):
• All technically qualified members of the public are “eligible”
to attend, and
• Attendees may take notes or otherwise make a personal
record (not necessarily a recording) of the proceedings
and presentations
• “eligible” means the registration fee is reasonably related
to cost of the event and reflecting an intention that all
interested and technically qualified persons be able to
attend OR
• Limits on actual attendance based upon first to apply or
selected on competence, experience, or responsibility
“Publication” EAR 734.7(a)(4)(iii):
• Publication includes submission of papers to
domestic and foreign editors and organizers of
conferences and meetings
• “with the understanding that the papers will be made
publicly available if favorably received”
Software and technology priced at no more than the cost of reproduction and distribution EAR 734.7(b):
• SW and TD published when “available for general
distribution either for free or at a price that does not
exceed the cost of reproduction and distribution”
• See Supp. No. 1, Qs G(1) through G(3)
• ONLY means to make software publicly available
other than publishing the source code (See Q G(1))
Encryption software EAR 734.7(c):
• Notwithstanding 734.7(a) and (b),
• Publicly available treatment is not extended to
ECCN 5D002 for EI reasons and remains subject
to the EAR
Fundamental research EAR 734.8:
• “ordinarily published and shared broadly within the
scientific community”
• University research not subject to the prepublication
review
• Except review solely to insure that the publication
would not inadvertently divulge proprietary
information that the sponsor has furnished to
university researchers or
• To prevent compromise of patent rights
Fundamental research in corporate environment EAR 734.8(d):
• Same standard as academic environment
• Researchers must be free to make scientific and technical information resulting from the research publicly available
• Another example of the term “publicly available” being used to define itself (probably means “published”)
• “Without restriction or delay based upon proprietary concerns or specific national security controls” related to government contracts
• Practical need for written business procedures that meet this standard
Fundamental research in corporate environment EAR 734.8(d) (Cont’d):
• Patent publication is sufficient only if information not patented is otherwise published
• Few companies meet this standard during the iterative development of technology
• Many companies later publish such technology
Pre-publication reviews
• Publicly available treatment is NOT available to transfer base-line trade secrets UNLESS the researcher will be free to publish the base-line information
• Publicly available treatment is not available to authorize transfer of the base-line information to the researcher if the employer or sponsor reserves the right to review the research results to prevent publication of the base-line proprietary information
• Analysis of prepublication review rights or the absence thereof is the most important issue in the determination of whether exchanges of information with foreign destinations or foreign persons enjoy publicly available treatment during the collaborative process in the university and corporation
Pre-publication reviews (Cont’d)
• Publicly available treatment will NOT authorize the non-U.S. person to participate in the research if the employer or sponsor reserves the right to restrict publication of some or all of the research
• In the research context, you have two license determinations:
Authority to transfer the base-line technology to the researcher
Authority to permit the researcher to have access to know how developed during the research
• However, if the sole purpose of the pre-publication review is a temporary delay to allow submission of a patent application, the publicly available treatment remains available
Fundamental research, the benefit over later publication
• Permits publicly available treatment during the
collaborative process of R&D
• Allows work with nationals of restricted countries
even when they are in the controlled destination
Educational information EAR 734.9
• Released by instruction
• In catalog courses and associated laboratories of
• Accredited academic institutions
Publishing in your library
• Put in your corporate library
• Give notice to all press contacts
• Make available to all comers including your
toughest competitor
Publishing on the Internet
• Same principles apply as with written books or
newspapers (other than encryption)
• Technology can be found via a search engine, or
• (In my judgment) issue a press release to all press
contacts
• Make available to all comers including your
toughest competitor
Plant tours
• A visitor on a plant tour may learn technology
• If the plant tour is open to the public the technology
that may be learned on a plant tour is publicly
available
• The tour must be open to all comers including
competitors
• If the plant tour policy is not open, license
exceptions may be available
Trade secret to combine publicly available technologies
• If you have a trade secret that combines multiple
technologies, each of which are publicly available,
the combination is not publicly available
• The whole is greater than the sum of the parts
Publicly available (EAR) vs public domain (ITAR)
• Similar language with fundamentally different approaches
• ITAR interpreted more narrowly
• ITAR said to prohibit publication of technology if exported under a Technology Assistance Agreement
• ITAR defense services not subject to public domain treatment
• More detail to come in the ITAR class
• Thank you
• May I take your questions?
Larry E. Christensen
202-626-1469
571-275-6999
/~:\.~.
\~TE' ~I
UNITED STATES DEPARTMENT OF COMMERCEBureau of Industry and SecurityWashington. D.C. 20230
January 11,2006
-
]Dear Mr.
This letter responds to your May 16, 2005 request for an advisory opinion on behalf of the [yonceming your stated understanding of the nexus between
export and deemed export requirements under the Export Administration Regulations (EAR), 15C.F .R. Parts 730-774, and the foreign filing requirements under the United States Patent andTrademark Office (USPTO) regulations, 37 C.F.R. Part 5.
As an initial matter, it may be helpful to clarify the nature ofBIS's: delegation of authority toPTO. BIS has provided PTO with the authority to license, on BIS's behalf, the export andreexport of technology that is subject to the EAR I when the technology is in the form of a patent
application or an amendment, modification, or supplement thereto or division thereof. See 15C.F.R. §§ 734.3(b)(I)(v); 15 C.F.R. 734.10(b). Exporters and reexporters who receive properauthorization from the USPTO to export such technology are not required to receive separate BISauthorization. Export authorization from the USPTO may be obtained in the form of a foreignfiling license in accordance with USPTO regulations. See 37 C.F .R. Part 5. BIS understands thatUSPTO foreign filing licenses are issued in written form as part of the "filing receipt" for patentapplications, or as separate written documents. USPTO foreign filing licenses authorize theexport of technical data to a foreign country only for purposes "relating to the preparation, filingor possible filing and prosecution of a [ore ign patent application." 37 C.F.R. § 5.11(b) (emphasis
added).
Technology is publicly available and, therefore, outside the scope of the EAR, among othercircumstances, if it is included in certain patent applications described in Section 734.10 of theEAR or if it is already published or will be published, as described in Section 734.7. Under theEAR, once a patent application or an amendment, modification, supplement or division thereof,has been filed with the USPTO, and the USPTO has issued a foreign filing license allowing theexport of the information, the information contained in the patent application is "publiclyavailable." 15 C.F.R. § 734.3(b)(3)(iv); 15 C.F.R. § 734.10(b). In addition, pursuant to Section
I Pursuant to the EAR, technology is the specific infonnation necessary for development,
production, or use of a product. See 15 C.F .R. § 772.1.
734.7(a)(3) of the EAR, patents and published patent applications available at any patent officeare publicly available "published infomlation." 15 C.F .R. § 734.7(a)(3). Technology that is"publicly available," as that teml is used in 15 C.F.R. 734.3(b)(3), is not subject to the EAR, andHIS does not regulate its export or reexport. See 15 C.F.R. § 734.3(b)(3).2
HIS provides the following information regarding your additional understandings:
Additional Understanding 1: During the timeframe from the patent application to theissuance of the patent (unless release earlier by the PTO), the patent information is eitherexport controlled or classified and should be protected as such under the EAR or theapplicable export control jurisdictional authority.
Between the time a patent application containing technology that is subject to the EAR issubmitted to the USPTO and the time that the USPTO publishes the application or issues thepatent, that technology remains subject to the EAR. Depending on the nature of the technology,its destination, the end-user, and the end-use, such technology might require a license from BISprior to export or reexport.
In some circumstances, the technology included in a patent application would not be subject tothe EAR, such as:
.
If the patent application has been granted by USPTO as a patent or is open(published) at any patent office. 15 C.F.R. §§ 734,3(b)(3)(i) and 734.7.
.
If the patent application or an amendment, modification, supplement or divisionthereof, has been filed with the USPTO, and the application has been approved forforeign filing either through an explicit USPTO foreign filing license or after sixmonths has elapsed from the filing of the patent ap'plication in the USPTO. 15C.F.R. § 734.3(b)(3)(iv); 15 C.F.R. § 734.10(b).
In addition, in some circumstances, the specific export transaction may not be subject to theEAR:
.
If the information contained is prepared wholly frolm foreign-origin technical data,and the patent application is being sent to a foreign inventor to be executed andreturned to the United States for subsequent filing with the USPTO. 15 C.F .R. §734. 1 D(a)
If the infonnation is sent to a foreign country before or within six months after thefiling of a U.S. patent application, and the infonnation is exported for the purposeof obtaining the signature of an inventor who was in the United States when the
.
2 Certain types of encryption software, however, are subject to the EAR, despite their public
availability. See 15 C.F.R. § 734.3(b)(3).2
invention was made or who is a co-inventor with a person residing in the UnitedStates. 15 C.F.R. § 734.10(c).
Additional Understanding 2:[ 'also understands that, if the inventor is aforeignnational who is not a Legal Perman"t:nt Resident, it is not required to get a deemedexport/export license if such a transfer would typically require one.
Transfers of technology that is subject to the EAR to "foreign nationals," as that term is used inSection 734.2(b)(2)(ii) of the EAR, in the United States, are treated under the EAR as if they aretransfers of such technology to the foreign national's country of origin. Section 734.2(b )(2)(ii)excludes from its license requirements "persons lawfully admitted for permanent residence intothe United States and. ..persons who are protected individuals under the Immigration andNaturalization Act (8 U.S.C. § 1324b(a)(3))." Ifa foreign-national inventor invents, on his or herown, such technology, no deemed export license is required because no transfer has occurred. Inaddition, the foreign-national inventor's further work involving his or her own invention does notinvolve a transfer of controlled technology to the foreign-national inventor, and therefore doesnot require a deemed export license. Any actual transfer to the fo'reign-national inventor oftechnology that is subject to the EAR may require a deemed export license, depending on thenature of the technology and the foreign national's country of origin.
Additional Understanding 3: It is also understood that the transfer of the patent informationto another foreign national who is not a Legal Permanent Resident, is required to get adeemed export/export license if such a transfer would require one.
As discussed in response to Additional Understanding 1 ~ above~ if a patent application has beenfiled~ and the technology underlying the patent is within the scope of the EAR~ a transfer of thetechnology to a foreign national in the United States~ as that term is used in 734.2(b)(2)(ii) of theEAR~ may require a deemed export license~ depending on the nature of the technology and theforeign national ~ s country of origin.
Additional Understanding 4: [ lalso understands that information associated with thepatent which is not in the patent itse'1J or product made as a result of the patent can still beexport controlled and licensable.
Information associated with a patent that is not in the patent itself and any product made as aresult of the patent may be subject to the EAR and, in a particular transaction, may require alicense. Determining if such information or product is subject to the EAR requires an analysisseparate from analysis of the patent. In addition, the specific facts of the transaction would haveto be analyzed to determine if a license is required.
3
Software controlled for "EI" reasons under Export Commodity Classification Number (ECCN)5DOO2 on the Commerce Control List and mass market encryption software with symmetric keylength exceeding 64-bits controlled under ECCN 5D992 is within the scope of the EAR and isnot eligible for the public availability exclusion set forth in Section 734.3(b)(3) of the EAR3. Assuch, even when such information is contained in a patent application for which a USPTOforeign filing license has been obtained or in a patent or an open (published) patent application, itremains within the scope of the EAR and may require export authorization from BIS.
In addition, the EAR require U.S. persons to obtain a license to perform any contract, service, oremployment that the U.S. person knows will directly assist in specified missile or chemical orbiological weapons activities regardless of whether the information transferred is publiclyavailable. 15 C.F .R. § 744.6(a)(2).
Regarding scientific research/experimental satellites within the meaning of22 C.F.C. §§121 (XV)(a) or (e), as these items are subject to Department of State's International Traffic inArms Regulations, such questions should be posed directly to the Department of State.
Issue for Clarification 2: The fundamental research exception to regulation of informationunder EAR within the meaning of22 CFR 120.11(8) and 15 CFR 734.8(a) and (b) is availableonly to accredited universities located within the United States.
The EAR provide that infonnation resulting from fundamental research may be excluded fromthe scope of the EAR as "publicly available" infonnation. See 15 C.F.R. § 734.3(b)(3)(ii). As itrelates to university based research, the fundamental research exception is available only to"accredited institution{s} of higher education in the United States." See 15 C.F.R. § 734.8(b).Pursuant to Sections 734.8(c) and (d) of the EAR, the fundamental research exemption is alsoavailable to certain research based at federal agencies, Federally Funded Research andDevelopment Centers (FFRDCs), and business entities. Research conducted by scientists orengineers who do not work for any of the institutions identified in Section 734.8(b) through (d) istreated as if it is research conducted at a business entity. See 15 C.F.R. § 734.8(e). As isexplained in response to Question 0(8) of Supplement No.1 to Part 734 of the EAR, it is "thetype of research, and particularly the intent and freedom to publis;h that identifies 'fundamentalresearch,' not the institutional locus."
As explained above in response to Issue for Clarification 1, HIS is unable to provide an advisoryopinion regarding interpretation of Department of State regulations. Such questions should be
3 The EAR use the phrase "publicly available" rather than "public domain" to avoid confusion
because the latter phrase is widely used in other areas of the law in ways that may not be fullyconsistent with the meaning of publicly available in the EAR.
4
Thank you for your patience during review of this request. If you have any questions orconcerns, please contact me in the Office of National Security and Technology Transfer Controlsat 202-482-4875.
Sincerely,
9-~~KcAlexander K. Lopes, Jr.Director, Deemed Exports and Electronics DivisionOffice of National Security andTechnology Transfer Controls Division
5
