When contemplating the ethical risks facing contractors complying
with myriad regulatory requirements, intellectual property often
is overlooked.
Apart from accounting abuses—such as using corporate research
and development funds to shelter and indirectly recapture cost overruns
on government contracts—intellectual property presents potential
risks.
For example, certain practices growing in popularity among cost-conscious
patent applicants and large-volume patent filers have created an
outsourcing boom.
Industrious, imaginative firms offer U.S. companies the opportunity
to have their patent applications drafted by engineers and patent
agents in countries such as India and Philippines, where wages are
low but the pool of engineering talent is considerable. With e-mail
as a convenient mechanism for transferring invention disclosures,
business managers and in-house counsel pressured to reduce outside
costs logically might turn to one of several off-shore vendors to
draft patent applications for filing in the U.S. Patent and Trademark
Office (USPTO).
The development of these services is a relatively new phenomenon
as globalization and outsourcing of all forms reach new heights.
However, use of such services can run afoul of regulatory compliance
requirements.
Traditionally, the U.S. company that created an invention would
initiate patent protection by filing an application in the U.S.
and, to the extent international protection was desired, would file
under the Patent Cooperation Treaty an application that eventually
could be nationalized in those countries where protection was desired.
Before filing the domestic U.S. application internationally, a foreign
filing license must be obtained.
The foreign filing license does not authorize any offshore technology
transfer that takes place between a U.S. inventor and the foreign
firm that drafts the patent application. Rather, that technology
transfer must be reviewed in advance to ensure that the subject
technology does not require authorization pursuant to either the
International Traffic in Arms Regulations (ITAR) or the Export Administration
Regulations (EAR) for the export.
If the underlying technology is of U.S. origin, then the ensuing
technology transfer must undergo the same export controls analysis
pursuant to the applicable U.S. regulations, as if the inventor
shipped a prototype of his invention to a consultant in India for
review. Transmitting technology via facsimile or email constitutes
an export.
Another misconception is that the technology passing between the
U.S. inventor and the foreign patent preparation service will eventually
be published—and therefore “in the public domain.”
Then the pre-publication technology transfer constitutes published
or publicly available information and is therefore excluded from
the EAR.
Inventions exchanged with foreign nationals outside the United
States for purposes of patent drafting and later filing with the
USPTO does not constitute published information under the EAR, and
therefore is not exempt from export control analysis. Once filed,
the USPTO, in consultation with the Departments of State and Defense,
might issue a secrecy order and ban further dissemination.
Disclosing the substance of the technology to foreign nationals
in drafting the patent application offshore therefore raises some
troublesome issues. If, for example, the technology forming the
basis of the invention is controlled pursuant to the EAR for export
to India, the inventor must, absent an exception to the license
requirement, secure an export license before transferring technology
to an Indian patent drafting company.
Clearly, there are ways to explore ethical cost savings through
intellectual property outsourcing. However, contractors should be
wary of service providers who promise costs savings without regulatory
review. To avoid exposure, the patent drafting company should be
asked to produce an advisory opinion from relevant export control
sections of the Commerce or State Department supporting the company’s
legal opinion that no export analysis is required.
Paul McQuade is a shareholder in Greenberg Traurig’s Intellectual
Property and Government Contracts Practices in McLean, Virginia.
The opinions expressed here are solely those of the authors and
are not intended to provide legal advice or represent the view of
NDIA or the NDIA Ethics Committee.