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Technology Transfer Controls:
Restrictions on Exchanges of Technical Information
Barry J. Hurewitz
Waltham, MA
May 31, 2012
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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
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Foundations for control
Unique nature of technology
 Control regimes attempt to reflect the special
character of technology
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Intangible
Dynamic
Collaborative
Derivative
Foundational
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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
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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
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Identifying controlled technology
Technology under the ITAR
120.10 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
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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
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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)
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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
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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
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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
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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)
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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
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Defining exports of technology
EAR tech transfer & deemed export
Export 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.
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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
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Determining technology controls
Public domain/publicly available
ITAR 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
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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
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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
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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”
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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
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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”…
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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!
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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 favoredcountry 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 thirdcountry nationals who are bona fide regular employees,
directly employed by the foreign consignee or end-user
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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
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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
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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 intraorganizational 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
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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.
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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
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Technology Control Plans
BIS required TCP contents

Statement of corporate commitment

Identification of key export management officials
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Training program
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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
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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
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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
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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”
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Questions?
 Barry J. Hurewitz
 Partner, WilmerHale
 +1 202 663 6089
 [email protected]
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