USPTO highlights need for strict compliance

A notice from the US Patent and Trademark Office (USPTO), administratively governed by the Department of Commerce, has recently charged up the Indian service provider community vending to patent offshore outsourcing. The notice states that a foreign filing licence from the USPTO is limited to the filing of foreign patent applications and does not permit the export of subject matter for the preparation of patent applications to be filed in the US. Applications involving the export of such material are subject to appropriate clearance from the Bureau of Industry and Security (BIS) at the Department of Commerce.

Foreign filing licenses

Title 37, Code of Federal Regulations (CFR) 5.11, mandates a license under title 35, US Code (USC) 184, for filing in a foreign country, an application for a patent on an invention created in the US, or for an international application.

The licence from the Commissioner of Patents also authorizes 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 BIS regulations, the International Traffic in Arms Regulation (ITAR) of the Department of State, and Foreign Atomic Energy Programs of the Department of Energy.

US export control regime

The US has established a comprehensive system of export controls through the enactment of export regulations by various departments and agencies regulating the worldwide transfer of goods, technology and services originating in the US.

The US Department of State through the Directorate of Defense Trade Controls, regulates technology relating to military applications in accordance with the Arms Export Control Act and the International Traffic in Arms Regulations. In terms of non-military exports, the US Department of Commerce restricts exports to certain countries through the BIS.

Exports of technology related to commercial and dual-use items are generally subject to Export Administration Regulations (EAR) administered by the BIS, however, jurisdiction is ceded to the USPTO to grant foreign filing licences under the EAR for the export of technical data for the filing or prosecution of a foreign patent application. Exports of such technology not approved under USPTO regulations must comply with EAR.

Export licence requirements depend upon an item’s technical characteristics, the destination, the end-user and the end-use.

Firstly, the export control classification number (ECCN) for the item must be found, in order to determine if it is included in the Commerce Control List (CCL). The CCL indicates controlled items including obvious categories such as products related to nuclear technology, but also less obvious technologies such as equipment or encrypted software.

Secondly, the ECCN must be crossreferenced with the country of ultimate destination to establish the export controls on that item particular to the destination.

Thirdly, certain individuals and organizations are barred from receiving US exports and others may only receive goods if they have been licensed. Accordingly, the following BIS databases should be reviewed:

1. The Entity List
2. The Treasury Department Specially Designated Nationals and Blocked Persons List
3. The Unverified List and
4. The Denied Persons List.

Finally, some end-uses may be prohibited while others may require a licence.

Determining requirements

Facts relevant to a transaction such as what an item is (depending on its classification within the Commerce Control List); where is it going (the country of ultimate destination); who will receive it (the ultimate end-user); what will they do with it (the ultimate end-use); as well as what else they do (conduct), will determine an individual’s obligations under the EAR.

Companies must also determine whether their commodities, software or technology are subject to EAR.

If an item is subject to the scope of EAR, licence requirements for the item under one or more of the general prohibitions under the EAR must be considered. Once it has been verified that the item is controlled by a specific ECCN, the information contained in the licence requirements section of that ECNN in combination with the country chart, is used to decide upon the requirements of a licence under the general prohibitions applicable to a particular destination.

India has a vibrant vendor community which serves the needs of patent offshore outsourcers in the areas of literature searches for inventions, prior art searches, patent portfolio analysis, patent proofreading, docketing services, drafting patent applications, patent drawing preparation and more.

In light of the recent notice from the USPTO, it has become imperative for outsourcers to have a comprehensive export compliance programme to manage technology control plans and monitor compliance.

Dr Sushil Kumar is vice-president of ClairvolexKnowledge Processes, a Delhi-based legaloutsourcing firm.