New export control reforms could impact R&D efforts at your hospital or research institution

Researchers at your institution will soon have more – or less – leeway to conduct their work with or without government issued licenses and approvals.

The State Department’s Directorate of Defense Trade Controls (DDTC) and the Commerce Department’s Bureau of Industry and Security (BIS) have issued proposed rules that will change export control regulations applicable to hospitals and research institutions. The proposed changes primarily focus on revisions to critical regulatory definitions. Below are a few of the key proposed reforms and information about the potential impact on your institution.

Are your researchers providing defense services?

DDTC’s proposed revision of the International Traffic in Arms Regulations (ITAR) marks the agency’s third attempt to redefine “defense services.” Currently, many research activities fall into this overly broad category, triggering ITAR registration and licensing requirements. Prior attempts to revise the definition of defense services raised concerns because of DDTC’s failure to exclude assistance given to foreign persons based solely on the use of information available in the public domain, as opposed to export controlled technical data or other proprietary information. Researchers believed this would increase their costs and burdens by requiring them to obtain licenses in order to collaborate with foreign researchers and students – without any positive impact on national security.

Unfortunately, DDTC’s entirely new approach to the definition does not appear to relieve these concerns. The agency is proposing that the critical factor in defining defense services is not the public or controlled nature of the information used – it’s what the person providing the assistance knows. If a person is assisting or training a foreign person, whether in the U.S. or abroad, in the production, assembly, modification, intermediate-level maintenance, demilitarization, destruction or processing of a defense article, and the provider has prior knowledge of U.S.-origin technical data directly related to the defense article at issue, than the activity constitutes a defense service. This is regardless of whether the provider relied on his or her knowledge of the technical data.

For example, consider a U.S. researcher assisting a foreign doctor with the testing of ITAR controlled biological agents based only on information available in a textbook. If the U.S. researcher had knowledge of export-controlled technical data related to the biological agents from previous studies, the assistance would constitute a defense service and require prior license or approval. Given the advanced experience and knowledge of many researchers in technical fields, it is easy to see how broadly the provision might apply.

The continued failure to exclude public domain information from the definition of defense service means that U.S. researchers with prior knowledge of applicable export controlled technical data will not be able to collaborate with foreign national colleagues, partners or sponsors on projects related to defense articles without an ITAR license or applicable exemption.

In fact, the definition of defense service is actually being expanded. It now includes assistance given in the “integration” of a defense article with any other item, regardless of whether the item is export controlled or if the assistance provider has pre-existing knowledge of export controlled technical data related to the defense article. The proposed definition of “integration” is quite broad, and would appear to include even minor changes or modifications to a defense article beyond very basic installations (e.g., “plug and play”).

For example, absent an applicable exemption, a U.S. research institution that provides a foreign national manufacturer with the information and training needed to integrate a civilian spring into atropine auto injectors specifically designed to counter nerve agent poisoning would require a license.

The line between export controlled technical data and public information

DDTC’s proposed rule also includes a revised definition of “public domain.” Under current regulations, information that is part of the public domain has been excluded from the definition of ITAR controlled technical data. However, the revised definition has raised concerns that you will now need prior approval of the U.S. government before any information that DDTC may consider to be subject to the ITAR can be disseminated.  

DDTC claims that the proposed prior approval requirements are not new; they are merely a more explicit statement of the ITAR’s current requirement that you must seek and receive a government license or other authorization in order to release ITAR controlled technical data. However, it is possible to read the proposed provision as stating that published technical information will still not be considered to be in the public domain unless it has been published with prior government approval. In addition to raising certain First Amendment issues, you might argue the provision places an undue burden on researchers accessing public information to determine whether its release was properly approved. DDTC has attempted to ease such concerns by noting that further dissemination of technical data made available to the public without authorization would not constitute a violation of the ITAR if the disseminator was unaware that the public release of the technical data was unauthorized.

Expansion of the “fundamental research” exemption

Traditionally, fundamental research – basic or applied research in science and engineering, the results of which are ordinarily published and shared broadly within the scientific community – has been excluded from the definition of technical data subject to the ITAR. In its proposed rules, DDTC has expanded this exemption to include not only research conducted at an accredited institution of higher learning, but also research that is funded, in whole or in part, by the U.S. government, provided such research is intended to be published.

Not surprisingly, DDTC holds that certain conditions must be met in order to qualify for this exemption. The researchers must be free to publish the technical data contained in the research without any restriction or delay, including U.S. government imposed access and dissemination controls or proprietary information review by the U.S. government. In contrast, BIS has proposed that technology controlled under the Export Administration Regulations that arises from or during fundamental research and is subjected to prepublication review would still qualify under the exception if such review:

1. Causes no more than a temporary delay in publication and is conducted solely to ensure that the publication would not compromise patent rights;
2. Is conducted by a research sponsor solely to insure that the publication would not inadvertently divulge proprietary information that the sponsor has furnished to the researchers; or
3. Is conducted with respect to research done by scientists or engineers working for a federal government agency or a federally funded research and development center.

However, it is important to keep in mind that the materials used to conduct fundamental research may still be considered export controlled technical data or technology subject to the ITAR or EAR, unless these materials themselves arose during or resulted from earlier fundamental research.

The agencies have requested that interested stakeholders provide comments on any unintended consequences or suggested revisions to the proposed rules by August 3, 2015.

For more information, please contact the attorney listed below.