Emerging Technology Transfer Issues under U.S. Export Controls by qfc10548

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									                                                                                     Fulbright & Jaworski l.l.p.




Emerging Technology Transfer Issues
               under
U.S. Export Controls and Embargoes

Houston Washington, d.c. Austin San Antonio Dallas New York Los Angeles Minneapolis London Hong Kong



                                                    March 22, 2004
                                                    J. Scott Maberry, ESQ.
                                                    Counsel
                                                    Fulbright & Jaworski LLP
                                                    Washington DC
                                                    smaberry@fulbright.com
                                                    202-662-4693
                                                                                         Fulbright & Jaworski l.l.p.


              Topics to be Covered
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• Introduction to U.S. Trade Controls: How
  Trade Controls Affect Intellectual Property
• “Deemed Export” and Technical Data Export
  Restrictions
• IP License Provisions to Consider
• Emerging Issues
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                                   Introduction
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•   Sanctions and Embargoes
•   “Dual Use” Export Controls
•   Arms Export Controls
•   Economic Espionage Act
•   Others
    –   Customs
    –   Anti-bribery
    –   Anti-boycott
    –   Foreign investment review
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                                       Sanctions
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• Main Regulator: U.S. Department of
  Treasury, Office of Foreign Assets
  Control (OFAC)
• Types of Regulation:
  –   Asset freeze
  –   Trade embargo
  –   Travel restrictions
  –   Offshore activities of foreign persons may be
      controlled
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                                         Sanctions
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• 26 active sanctions programs; more to come
    – Country-specific programs, e.g., Burma, Cuba, Iran, Liberia, Libya,
      North Korea, Sudan, Syria, Zimbabwe
    – Programmatic sanctions: narcotics, terrorism
    – “Specially Designated Nationals”
• Differences in purpose, jurisdictional reach, and prohibitions.
• Exceptions are narrow
    –   Information & informational materials
    –   humanitarian donations
    –   de minimis
    –   IP protection
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                                     Sanctions
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• Selected Prohibitions
  – Asset blocking
  – Export or import of goods, technology, or
    services
  – “Reexport” of U.S. origin goods, services,
    or technology
  – Evasion / Avoidance
  – “Facilitation”
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                                     Sanctions
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Sample technology transfer Provisions
• Export / reexport
• Import
• Blocked property
• “Direct Product”
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Current and Future Sanctions
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                                        Sanctions
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IP Protection Exceptions
• Exceptions vary by program
• Example: Iran regulations allow the following:
   –   Filing, payment of fees
   –   receipt of patent, copyright
   –   renewal
   –   filing or defending infringement or opposition actions
• But Note: Libyan trademark office is open, but no IP
  exception from OFAC
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                                      Sanctions
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• Direct export violation: export to a sanctioned party or
  country
• Indirect export violation
   – export to a third party with knowledge or reason to know of
     export to a sanctioned party
   – Don’t self-blind
• “Inventory” exception
   – export into third party inventory
   – no specific order from sanctioned party
   – third party’s business not “predominantly” with sanctioned
     party or country
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                                      Sanctions
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• Emerging Issue: License versus sale
   – OFAC assumes licensor maintains control
   – License provisions required to prevent improper use,
     retransfer
• Affects inventory analysis
   – No written guidance
   – OFAC informal guidance suggests that licensor must control
     final destination through license provisions
• Note: royalty payments -- may need to analyze
  sanctioned party “interest”
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                        Dual Use Controls
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• Regulations: Export Administration Regulations
  (EAR)
• Main regulator: U.S. Department of Commerce,
  Bureau of Industry & Security (BIS)
• Items regulated: “dual use” (i.e., non-munitions) items
  and related technology: Commerce Control List
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                        Dual Use Controls
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Types of regulation
• Product/destination controls -- country charts
• End use / end user controls
• Re-export controls
• “Deemed export” of technology
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            Dual Use Deemed Exports
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• Exports include “disclosure” by oral or written
  communication or visual inspection, wherever it
  occurs
• A foreign national is treated as a foreign country
• Authorization to work in U.S. does not authorize
  disclosure
• Examples:
   –   Chinese national employee on a B-1 visa
   –   Austin meeting with Indian engineers
   –   Upload software upgrade to Saudi Arabia
   –   Site visit to Russian customer
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          Dual Use Deemed Exports
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What’s “emerging”?
• Enhanced deemed export enforcement
• Some enforcement officials suggest that the
  “education” phase of deemed export controls is over
• BIS enforcement resources, sophistication improving
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                   Arms Export Controls
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• Regulations: International Traffic in Arms Regulations
  (“ITAR”)
• Regulator: U.S. Department of State, Directorate of
  Defense Trade Controls (DTC)
• Items regulated: -- U.S. Munitions List (USML)
   – “specially designed for” military use
   – related “technical data”
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                   Arms Export Controls
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Types of regulation
• Registration required for manufacturers and
  exporters of defense items and services
• Product controls to virtually all destinations
• Export and re-export controls
• no de minimis exception
• Technical data exports controlled
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         ITAR Technical Data Exports
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• Greater restrictions than EAR deemed export
• Exports include “disclosure” by oral or written communication or
  visual inspection, wherever it occurs
• A foreign national is treated as a foreign country
• Authorization to work in U.S. does not authorize disclosure
• Examples:
    –   UK national employee on a B-1 Visa
    –   Austin meeting with Indian engineers
    –   Upload software upgrade to Saudi Arabia
    –   Site visit to Chinese customer
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                   Arms Export Controls
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Emerging issue: Employment License
• New in 2003-2004
• Authorizes technical data exports to foreign national
  employee
• May be better than a TAA
• Note: does not authorize defense services.
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               Economic Espionage Act
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• Criminalizes economic espionage
• Cases Investigated by FBI, often in conjunction with
  BIS or DTC
• FBI’s “outreach” program: Awareness of National
  Security Issues and Response (ANSIR)
   –   Designed to reduce your vulnerability
   –   Disseminates unclassified threat info
   –   A visit by the ANSIR Agent from Houston
   –   Sometimes segues into an export investigation
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       License Provisions to Consider
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• Licensee shall comply
• No export / reexport / use without proper
  authorization
• List of countries?
• List of lists?
   –   SDN List
   –   Denied Persons
   –   Unverified List
   –   Entity List
   –   Debarred List
   –   Non-U.S. Lists?

• Assign costs, liabilities?
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                         IP Structural Issues
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Non-U.S. entities -- no jurisdictional reach?

                    USCO                                                                  EU CO


           100%                                                                                              100%
                     US Sub         50%
                                                         US JV                      50%
                                                                                            US Sub



                                                                                  US / EU


           100%                                                                                              100%
                     EU Sub                              EU JV                             Guernsey
                                    50%                                             50%
                                                                                             Sub
                                                          ROW
                              Non-Sanctioned
                                                                           Sanctioned
                              (except TWEA)
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                            IP Structural Issues
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IP structure may affect jurisdiction

                                   Directors
           Data Management
                                        2 members                                 2 members
 US                                                    Management
Server                 USCO                            Committee
                                                                                              EU CO
                       Technology Flow                                                  Technology Flow


              100%                                                                                              100%
                        US Sub         50%
                                                            US JV                      50%
                                                                                               US Sub
    Data

                                                          Commission
               Loan against assets                        Agreement                  US / EU
 Data

              100%                                                                                              100%
                        EU Sub                              EU JV                             Guernsey
                                       50%                                             50%
                                                                                                Sub
                                                             ROW
                                 Non-Sanctioned
                                                                              Sanctioned
                                 (except TWEA)
                                                                                     Fulbright & Jaworski l.l.p.




Emerging Technology Transfer Issues
               under
U.S. Export Controls and Embargoes

Houston Washington, d.c. Austin San Antonio Dallas New York Los Angeles Minneapolis London Hong Kong



                                                    March 22, 2004
                                                    J. Scott Maberry, ESQ.
                                                    Counsel
                                                    Fulbright & Jaworski LLP
                                                    Washington DC
                                                    smaberry@fulbright.com
                                                    202-662-4693

								
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