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Technology Transfer Controls:Restrictions on Exchanges of Technical Information
Barry J. HurewitzWaltham, MA May 31, 2012
WilmerHale 2
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Overview
1 Foundations for control
2 Identifying controlled technology
3 Defining exports of technology
4 Determining technology controls
5 Technology control plans
6 Technology control challenges
WilmerHale 3
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Foundations for control
Unique nature of technology
Control regimes attempt to reflect the special character of technology
Intangible Dynamic Collaborative Derivative Foundational
WilmerHale 4
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Foundations for control
Regulatory objective
Controls for same reasons for export control as for commodities, equipment, materials and software Deny access to adversaries
Maintain qualitative technical superiority
Heightened concern for technologies conveying development or production capabilities, as opposed to only operation/use
WilmerHale 5
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Foundations for control
Sources of technology controls
Classified information: National Industrial Security Program Operating Manual
Defense trade: International Traffic in Arms Regulations
Dual-use technologies: Export Administration Regulations
WilmerHale 6
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Identifying controlled technology
Technology under the ITAR120.10 Technical data
(1) Information required for the design, development, production, manufacture, assembly, operation, repair, testing, maintenance or modification of defense articles E.g., Information in the form of blueprints, drawings,
photographs, plans, instructions or documentation
(2) Classified information
(3) Invention secrecy order
(4) Software directly related to defense articles
WilmerHale 7
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Identifying controlled technology
Technology under the ITAR
“Technical data” does not include
General scientific, mathematical or engineering principles commonly taught in schools, colleges and universities
Information in the public domain (e.g., published and which is generally accessible or available to the public)
Basic marketing information on function or purpose
General system descriptions of defense articles
WilmerHale 8
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Identifying controlled technology
ITAR defense services
120.9 Defense service
(1) Assistance (including training) to foreign persons, in the design, development, engineering, manufacture, production, assembly, testing, repair, maintenance, modification, operation, demilitarization, destruction, processing or use of defense articles
(2) Furnishing controlled technical data
(3) Military training of foreign units and forces
Even if services involve public domain data
Subject to licenses or agreements (TAA/MLA)
WilmerHale 9
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Identifying controlled technology ITAR defense services
Proposed revised definition (4/13/11)
Exclude:– Services based solely on public domain data
– Mere hiring of foreign nationals
Include: – Integration of items into defense articles
– Training, but only with respect to employment of defense articles
WilmerHale 10
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Identifying controlled technology Technology under the EAR
Technology: Specific information necessary for the “development,” “production,” or “use” of a product
Technical data may take forms such as blueprints, plans, diagrams, models, formulae, tables, engineering designs and specifications, manuals and instructions written or recorded on other media or devices such as disk, tape, read-only memories
Technical assistance may take forms such as instruction, skills training, working knowledge, consulting services; may involve transfer of technical data
WilmerHale 11
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Identifying controlled technology Technology under the EAR
Development: All stages prior to serial production, such as: design, design research, design analyses, design concepts, assembly and testing of prototypes, pilot production schemes, design data, process of transforming design data into a product, configuration design, integration design, layouts
Production: All production stages, such as: product engineering, manufacture, integration, assembly (mounting), inspection, testing, quality assurance
WilmerHale 12
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Identifying controlled technology Technology under the EAR
Use: Operation, installation (including on-site installation), maintenance (checking), repair, overhaul and refurbishing
“All six activities in the definition of ‘use’ must be present to trigger a license requirement” 71 Fed. Reg. 30843 (5/31/2006)
WilmerHale 13
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Defining exports of technology
Technology export under the ITAR
120.17 Export
(1) Sending or taking defense article out of the U.S. (except mere travel by a person with personal knowledge that includes technical data
(2) Transfer of controlled aircraft, vessel, or satellite (3) Disclosure via oral or visual disclosure
-- To foreign government, embassy or mission -- To a foreign person
(4) Performing a defense service on behalf of, or for the benefit of, a foreign person
WilmerHale 14
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Defining exports of technology EAR tech transfer & deemed exportExport of technology or (non-encryption) software: Release of technology or software in a foreign country Release of technology or source code to a foreign national (deemed export)
“Release” occurs via: Visual inspection Oral exchanges Application abroad of personal knowledge or technical experience acquired in the U.S.
WilmerHale 15
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Determining technology controls
Limitations on technology controls
Public availability/public domain
Operation and sales technology
“Required” to achieve or exceed regulatory threshold
Intra-organizational disclosures
Limited-purpose disclosures
Disclosures with assurances
WilmerHale 16
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Determining technology controls
Public domain/publicly availableITAR 120.11 EAR 734.3-734.11
Retail sale Published for general distribution
Subscription without restriction De minimis controlled U.S. origin content
Second class U.S. mail
Libraries open to the public Public or university libraries
Patents Patents and published patent applications
Open conference, meeting, seminar, trade show
Public release with government approval
Educational information (catalog courses & associated teaching
laboratories)
Fundamental research
WilmerHale 17
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Determining technology controls
EAR operation technology
Operation technology is the minimum technology necessary for the installation, operation, maintenance (checking), and repair
Minimum necessary does not include technology for development or production and includes use technology only to the extent “required” to ensure safe and efficient use
Subject to further restrictions under specific ECCNs
WilmerHale 18
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Determining technology controls
EAR sales technology Sales technology means data supporting a prospective or actual quotation, bid, or offer to sell, lease, or otherwise supply an item
Of a type customarily transmitted with a prospective or actual
quotation, bid, or offer in accordance with established business practice
Excluding detailed design, production, or manufacture technology, or
the means of reconstruction, of either the quoted item or its product that
the consignee could employ to reduce the technology to production
Subject to further restrictions under specific ECCNs
WilmerHale 19
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Determining technology controls Types of EAR technology controls Unqualified: “Technology” for the “development,” “production,” or “use” of items controlled by [ECCN]
Qualified: “Technology,” according to the General Technology Note, for the “development,” “production,” or “use” of items in [ECCN]
– Also: “Technology” exclusively for the “development” or “production” of [item]
Catchall: ECCN 0E521 will cover “[a]ny technology subject to the EAR that is not listed elsewhere in the CCL, but which is controlled for export because it provides at least a significant military or intelligence advantage to the U.S. or for foreign policy reasons”
WilmerHale 20
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Determining technology controls EAR General Technology Note
The export of “technology” that is “required” for the “development,” “production,” or “use” of items on the Commerce Control List is controlled according to the provisions in each Category
“Technology” “required” for the “development,” “production,” or “use” of a controlled product remains controlled even when applicable to a product controlled at a lower level
WilmerHale 21
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Determining technology controls
EAR General Technology Note
Required: …that portion of “technology” or “software” which is peculiarly responsible for achieving or exceeding the controlled performance levels, characteristics or functions Example: Product X is controlled if it operates at or above 400
MHz and is not controlled if it operates below 400 MHz.
– If production technologies A, B, and C allow production at no more than 399 MHz, then technologies A, B, and C are not “required” to produce the controlled product X
– If technologies A, B, C, D, and E are used together, a manufacturer can produce product X that operates at or above 400 MHz
– In this example, technologies D and E are “required”…
WilmerHale 22
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Determining technology controls
EAR General Technology Note
Required technology refers only to that portion of technology which is peculiarly responsible for achieving or exceeding controlled performance levels, characteristics or functions
In classifying technology, granularity matters!
WilmerHale 23
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Determining technology controls
Options for intra-organizational export
EAR License Exceptions BAG and TMP License Exception STA
Proposed License Exception ICT
Internal-use of encryption technology to U.S. subs and favored-country private-sector end users
ITAR 125.4(b)(9): Allows technical data export by a U.S. person
who is an employee of a U.S. corporation to a U.S. person employed by that corporation outside the United States
124.16 and 126.18: Allows certain exports to dual or third-country nationals who are bona fide regular employees, directly employed by the foreign consignee or end-user
WilmerHale 24
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Technology Control Plans
Topics for technology control planning
Define the stakeholders subject to controls Describe the covered information Designate & empower responsible company officials Physical access control (segregated work areas) Technical/IT security control Administrative safeguards (badging, escorts) Compliance certification Training/indoctrination Monitoring and internal reporting Sanctions Corrective action
WilmerHale 25
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Technology Control Plans
TCP origins in the NISPOM
NISPOM 10-509: A TCP is required to control access by foreign nationals
assigned to, or employed by, cleared contractor facilities…
The TCP shall contain procedures to control access for all
export-controlled information
NISPOM 2-307: A TCP shall be implemented by companies cleared under
FOCI negation measures
WilmerHale 26
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Technology Control Plans
TCPs in the ITAR
126.13(c): TCP required when foreign nationals are employed at or assigned to security-cleared facilities
126.18(c)(2): “Technology security/clearance plan” required as condition of exemption for intra-organizational transfers
124.15(a)(1): “Technology transfer control plan” and “encryption technology control plan” required to support satellite-related licenses
126.5(c)(4): “Technology transfer control plan” to support use of Canadian exemption
WilmerHale 27
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Technology Control Plans
TCPs in BIS practice BIS guidance: TCPs required in cases when foreign nationals are employed at or assigned to … facilities that handle export-controlled items or information
TCP license condition for technology transfer Establish satisfactory procedures to ensure compliance with the
conditions of this license, particularly those regarding limitations on
access to controlled technology by consignee and the requirement to
obtain U.S. government authorization before divulging controlled
technology to other parties.
Consignee shall implement their TCP to ensure compliance with the
conditions of this license. A copy of the TCP must be delivered to
DOC/BIS prior to the export of technology.
WilmerHale 28
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Technology Control Plans
TCPs in BIS practice
TCP license condition for deemed exports Applicant will establish procedures to ensure compliance with
the conditions of this license, particularly those regarding
limitations on access to technology by foreign nationals. The
Applicant’s key export control management officials will
ensure that the foreign national complies with [these license
conditions]. A copy of such procedures will be provided to
DOC/BIS. Minimum necessary disclosures
Non-disclosure notice and certification
WilmerHale 29
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Technology Control Plans
BIS required TCP contents
Statement of corporate commitment
Identification of key export management officials
Training program
Security procedures for preventing access to controlled technology by unauthorized personnel (e.g., badges, access codes) including procedures for visitors and unauthorized employees
Pre-employment screening and non-disclosure agreement
Access restrictions to ensure employees do not received controlled technology until authorized
Distribution restrictions to ensure that controlled technology is not disseminated in an unauthorized manner
WilmerHale 30
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Technology control challenges
Managing access to changing intangible information
Classifying nascent technologies Incorporating export classification into patent process
Controlled technologies developed by foreign nationals
Actual vs. potential access to controlled technology Access to global corporate networks
WilmerHale 31
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Technology Control Plans
Special technology transfer challenges Applying de minimis standards “Reexports of foreign technology commingled with or drawn from
controlled U.S.-origin technology” (EAR 734.4) Valuation of foreign and controlled U.S. origin technology
One-time report for government verification
Technical assistance relating to encryption items … technical assistance, when rendered with the intent to aid in the
“development” or “production” of encryption commodities or software
…, may require authorization under the EAR even if the underlying
encryption algorithm to be implemented is from the public domain or
is not of U.S. origin. EAR 774 Supp. No. 1, ECCN 5E002 License Req. Note
WilmerHale 32
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Technology Control Plans
Special technology transfer challenges
Discerning the purpose(s) of technical assistance pertaining to non-controlled items
Employee travel policies and practices
Technology control in international joint ventures Appointment and reporting by compliance personnel
Contractual safeguards to ensure compliance
Managing deemed export compliance
Managing technology transfer in the “cloud”
WilmerHale 33
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Questions?
Barry J. Hurewitz
Partner, WilmerHale
+1 202 663 6089