On July 23, 2008, the U.S. Patent and Trademark Office (PTO) issued a notice which warned that U.S. export controls might apply to transfers of technical data in the context of outsourcing of patent preparations. See 73 Federal Register 42781 (July 23, 2008).
This client advisory describes the application of U.S. export controls and sanctions to the export of technical data in connection with patents. Such exports can occur in a variety of contexts. For example, in commissioning Freedom to Practice or Operate studies, patent lawyers or companies may hire searchers to locate patents filed in the United States or abroad which implicate a particular business. Such searchers can be located in foreign countries, and, when they are, it may be necessary to export technical data to them to facilitate their searches. In addition, exports of technical data might occur in connection with the preparation, filing or possible filing and prosecution of patent applications, either in a foreign country or in the United States. Except for two limited situations, export controls potentially apply to exports of such technical data.
The three major relevant U.S. export control regimes relevant to patents are:
- The Export Administration Regulations (EAR), 15 C.F.R. Part 730 et seq., issued pursuant to the Export Administration Act of 1979, as amended, 50 USC App. Sections 2401-2420,1 administered by the U.S. Department of Commerce’s Bureau of Industry and Security (BIS) and governing exports and re-exports of dual-use goods, software and technical data.
- The International Traffic in Arms Regulations (ITAR), 22 C.F.R. Parts 120-130, issued pursuant to the Arms Export Control Act of 1996, 22 USC Section 2778 et seq., administered by the Department of State’s Directorate of Defense Trade Controls (DDTC) and governing Munitions List goods, software, technical data and defense services.
- The Foreign Atomic Energy Programs (DOE), 10 C.F.R. Part 810, issued pursuant to the Atomic Energy Act of 1954, as amended, 42 USC Section 2011 et seq., administered by the Department of Energy and governing certain nuclear technology exports.
Exports of technical data in connection with patents are treated the same as any exports of technical data under these regimes and could potentially require an export license, except in two circumstances: (1) if the technical data is public information through being “published” or “public domain” as part of a patent, in which case it is released from export controls, or (2) if the technical data is connected with the filing of a patent outside the United States and meets certain regulatory criteria, in which case licensing of the export is delegated to the Commissioner for Patents at the PTO.
The Public Information Exception
If the information qualifies as “published” under the EAR or “public domain” under the ITAR, export controls do not apply. Section 734.7(a)(3) of the EAR exempts from the EAR “published information and software” in the form of “patents and open (published) patent applications available at any patent office.” In the United States, a patent is “open (published)” 18 months after it has been filed unless the applicant files a non-publication request, which typically defers publication until issuance of the patent. Thus, technical data in patents filed in the U.S. is normally released from control under the EAR upon its publication at the end of 18 months. However, this exception does not eliminate export controls on technical data relating to patents which have not yet been filed in the United States, or which have been filed but as to which the 18 months have not run. Therefore, it is likely to be of limited use in connection with the types of technical data exports described above.
Section 125.1(a) of the ITAR similarly exempts information which is in the “public domain” from licensing requirements under the ITAR. Section 120.11(5) of the ITAR defines “public domain” to include “information which is published and which is generally accessible or available to the public . . . [t]hrough patents available at any patent office.” As under the EAR, this exception is of limited utility in connection with the types of exports of technical data described above.
Finally, Section 810.7(a) of the DOE authorizes “furnishing public information,” which Section 810.3 defines to include “[i]nformation contained in an application which has been filed with the U.S. Patent Office and eligible for foreign filing under 35 U.S.C. 184 or which has been made available under 5 U.S.C. 552, the Freedom of Information Act.”2
Delegated Licensing Authority for Foreign Patents
The EAR, ITAR and DOE have delegated very limited export licensing authority to the PTO. That delegated authority applies only to exports of unclassified technical data pertaining to patent applications to be filed in foreign countries—it does not extend to patent applications intended to be filed in the U.S. This restriction is attributable to the limited delegation of authority authorized by the underlying statute at 35 USC Section 184.
Delegation Under the EAR
Section 734.3(b)(5) of the EAR states:
Regulations administered by PTO provide for the export to a foreign country of unclassified technology in the form of a patent application or an amendment, modification, or supplement thereto or division thereof (37 CFR Part 5). BIS has delegated authority under the Export Administration Act to the PTO to approve exports and re-exports of such technology which is subject to the EAR. Exports and re-exports of such technology not approved under PTO regulations must comply with the EAR.
In addition, Section 734.3(b)(3)(iv) declares that publicly available technology and software which is “included in certain patent applications” is not subject to the EAR. For this purpose, the relevant information in patent applications is elaborated upon at Section 734.10 of the EAR and is limited to
- information contained in a patent application prepared wholly from foreign-origin • technical data where the application is being sent to the foreign inventor to be executed and returned to the United States for subsequent filing with the U.S. PTO;
- information contained in a patent application, or an amendment, modification, supplement or division of an application, and authorized for filing in a foreign country in accordance with the regulations of the PTO; or
- information contained in a patent application when sent to a foreign country before or within six months after the filing of a United States patent application for the purpose of obtaining a signature of an inventor who was in the United States when the invention was made or who is a co-inventor with a person residing in the United States.
Delegation Under the ITAR
Similarly, Section 125.2(b) of the ITAR, governing “exports of unclassified technical data,” states (albeit in a backhanded and somewhat confusing manner) as follows:
Patents. A license issued by the . . . [Directorate] of Defense Trade Controls is required for the export of technical data whenever the data exceeds that which is used to support a domestic filing of a patent application or to support a foreign filing of a patent application whenever no domestic application has been filed. Requests for the filing of patent applications in a foreign country, and requests for the filing of amendments, modifications or supplements to such patents, should follow the regulations of the U.S. Patent and Trademark Office in accordance with 37 CFR Part 5. The export of technical data to support the filing and processing of foreign patent applications in foreign countries is subject to regulations issued by the U.S. Patent and Trademark Office pursuant to 35 USC 184.
The net effect is to accord broadly with the EAR—namely to limit the delegation of export licensing authority to PTO to exports of unclassified technical data in connection with foreign patent filings and processing.
Delegation Under the DOE
Section 810.7(a) of the DOE regulations authorizes “furnishing public information, as defined in Section 810.3.” Section 810.3, in turn, defines “public information” to include “information contained in an application which has been filed with the U.S. Patent Office and eligible for foreign filing under 35 USC 184 . . . .”
Licensing by the PTO
The PTO’s regulations at 37 C.F.R. Section 5.11(a) reflect the above delegations of licensing authority by providing that
A license from the Commissioner for Patents under 35 USC 184 is required before filing any application for patent, including any modifications, amendments, or supplements thereto or divisions thereof or for the registration of a utility model, industrial design, or model, in a foreign patent office or any foreign patent agency or any international agency other than the United States Receiving Office, if the invention was made in the United States and:
(1) An application on the invention has been on file in the United States less than six months prior to the date on which the application is to be filed, or
(2) No application on the invention has been filed in the United States.
Subsection (b) of Section 5.11 further provides that:
The license from the Commissioner for Patents referred to in paragraph (a) would also authorize the export of technical data abroad for purposes relating to the preparation, filing or possible filing and prosecution of a foreign patent application without separately complying with the regulations contained in . . . [the ITAR, EAR or DOE regulations].
Section 5.11(c) of the PTO regulations additionally provides that:
Where technical data in the form of a patent application, or in any form, are being exported for purposes related to the preparation, filing or possible filing and prosecution in a foreign patent application, without the license from the Commissioner for Patents referred to in paragraphs (a) or (b) of the section, or on an invention not made in the United States, the export regulations contained in . . . [the ITAR, EAR or DOE regulations] must be complied with unless a license is not required because the United States application was on file at the time of export for at least six months without a secrecy order . . . being placed thereon.
The Department of the Treasury’s Office of Foreign Assets Control (OFAC) maintains sanctions against certain countries, entities and individuals which are separate from the export control regimes discussed above. OFAC’s sanctions are administered pursuant to separate statutory authority, primarily under the Trading with the Enemy Act, (TWEA), 50 USC App. Sections 1-44, or IEEPA, depending on the country program (Cuba is the last major remaining TWEA program), and are implemented under regulations contained at 31 C.F.R. Part 500 et seq. These regulations vary in their details from country to country, and the list of sanctioned countries can change at any time. The current list of countries subject to full-scope sanctions, which prohibit most transactions with the target countries, includes Cuba, Iran, Sudan and Syria. Full-scope, list-driven sanctions also are in force against designated entities and individuals on OFAC’s Specially Designated Nationals List (the “SDN List”). It is advised that any person exporting technical data from the United States screen all transactional partners against both the sanctioned country list and the SDN List, which is available at OFAC’s website at www.ustreas.gov/offices/enforcement/ofac/sdn/index.html.
Partial sanctions, which are list-driven and aimed at certain named or designated government officials, also apply to countries such as Zimbabwe, Belarus, the Democratic Republic of Congo, etc.
Penalties for violations of the EAR and OFAC sanctions include civil fines of up to the greater of twice the value of the transaction or $250,000 per violation and criminal penalties of up to $1 million in fines and 20 years imprisonment per violation. ITAR penalties include civil fines of up to $500,000 per violation and criminal penalties of fines of up to $1 million and 10 years imprisonment. Violations of the DOE regulations are punishable by fines of up to $20,000 and life imprisonment. Civil enforcement by both BIS and OFAC, in particular, is robust. The OFAC sanctions are a strict liability regime. Further, the U.S. Government has recently stepped up criminal enforcement of EAR, ITAR and OFAC violations by the creation of a new Assistant Attorney General for National Security and implementation of a more aggressive enforcement agenda, which has resulted in a series of high-profile criminal cases. (See Alston & Bird LLP client advisory “Enforcement Activity Mounts as Department of Justice Focuses on Exporters,” May 7, 2007.)
Based on the above exceptions and delegations, the following guidelines should assist in handling exports of technical data in connection with patents.
- If the technical data being exported is contained in an open (published) patent, with such status not normally achieved until 18 months after the patent has been filed, it can be exported or re-exported without an export license.
- Licensing authority delegated by BIS, DDTC and DOE to the PTO is sharply limited and extends only to unclassified technical data contained in a patent application for filing in a foreign country.
- In the case of unclassified technical data contained in a patent application for filing in a foreign country, a license still will be required from the PTO, which may or may not grant the license.
- Exports of classified technical data require authorization from BIS, DDTC or DOE, as appropriate, and, in addition, may have to meet separate requirements under the National Industrial Security Program Operating Manual (NISPOM), which governs classified contracts and is administered by the Department of Defense’s Defense Security Service (DSS).
- There are no broad exemptions or general licenses authorizing the export of technical data in connection with the preparation of U.S. patents under the regulations administered by BIS, DDTC or DOE.
- In the case of BIS, prior to making such an export, the exporter must determine whether the technology is controlled on the Commerce Control List (CCL), which is found at Section 774 of the EAR and can be accessed at www.access.gpo.gov/bis/ear/ear_data.html. If it is controlled, the individual Export Commodity Control Number (ECCN) on the CCL will indicate whether it is controlled for export to the particular country, such as India. If it is controlled for export to that particular country, the export will require an individual validated license from BIS prior to its export unless a license exception applies.
- License Exception TSR (Technology and Software Under Restriction), found at Section 740.6 of the EAR, possibly might apply to some controlled exports to certain destinations, as indicated by the individual ECCN governing the technical data in question. If it does apply, mandatory end-user assurances are required prior to export, as detailed at Section 740.6 of the EAR.
- In addition to exports to foreign countries, both the EAR and ITAR require licenses for so-called “deemed exports.” A deemed export occurs when technical data is transferred to a person physically present in the United States who is neither a U.S. citizen nor resident alien, if the transfer of that technical data to that person’s country of origin would require an export license. Thus, hypothetically, the transfer of technical data to an Indian national working in the U.S. would require a deemed export authorization if the export of that data to India requires an export license. “Deemed re-exports” govern transfers to such persons in third-world countries abroad.
- In the case of DDTC, all technical data relating to Munitions List items under the ITAR require an individual validated license from DDTC irrespective of the destination (with the exception of Canada). In addition, at Section 126.1 of the ITAR, DDTC maintains a list of countries to which exports are prohibited. The list can change at any time.
- Both BIS and the Department of State maintain various lists of prohibited parties to whom, generally, unlicensed exports may not be made. Some of these lists, such as the Entity List maintained by BIS, contain the names of prohibited parties in countries such as India and China. Prior to making any export of technical data, the parties involved in the export should be run against these lists, which can be accessed as follows:
- Denied Persons List (http://www.bis.doc.gov/dpl/thedeniallist.asp);
- Entity List (http://www.bis.doc.gov/Entities/Default.htm);
- Unverified List (http://www.bis.doc.gov/Enforcement/UnverifiedList/unverifiedparties.html);
- Department of State Nonproliferation Lists (http://www.state.gov/t/isn/c15231.htm).
- Separate OFAC sanctions prohibit exports of technical data to Cuba, Sudan and Iran. Separate sanctions administered by BIS prohibit them to Syria. Transactions should be reviewed to ensure that none of these full-scope sanctioned, countries is involved.
- Each export transaction also should be vetted against OFAC’s SDN List, which is available at www.ustreas.gov/offices/enforcement/ofac/sdn/index.html.