Tech Transfer has emerged as an exciting topic, as the new tech economy is booming in the U.S. and among America’s largest trading partners. It allows companies to innovate and stay competitive by leveraging cutting-edge technologies, but it also involves navigating complex regulatory landscapes. These regulations ensure that the transfer process maintains ethical standards, protects intellectual property, and adheres to safety protocols. Understanding these dynamics is crucial for businesses looking to capitalize on new technologies while minimizing potential legal and operational risks.
The term tech transfer carries different meanings in different contexts. It represents business opportunity, where the term is used to represent the transfer of federal government-funded research and development to private enterprise for commercialization. The evolution of this type of tech transfer has been deliberate and by design, as federal funds are used to drive innovation and marketability by private enterprise. Tech transfer can also represent substantial business risk regarding export control compliance when technology, including information, is being conveyed to foreign customers, governments, or agencies.
Tech transfer signifies business opportunity, risk and complexity for Virginia businesses, particularly those engaged in high tech industries, government contracting, emerging technology research and development, and knowledge transference. Large publicly traded corporations, small and mid-sized stock corporations and LLCs, universities, nonprofits, and government actors all have an interest in understanding the landscape of tech transfer to manage risk and capitalize on commercial opportunity.
Sometimes, the term is associated with defense business and government contractors only. Yet in reality, its reach flows readily into other business sectors, particularly with respect to dual-use technologies. Dual-use technologies are those that have applications across two or more demand categories, such as GPS, thermal imaging, and unmanned systems. Unmanned systems, for example, can be used not only for military strike, sensing, surveillance and reconnaissance, but also for infrastructure inspections and surveys, natural disaster assessments, and delivery of goods.
Tech Transfer as Business Opportunity
Tech transfer offers business opportunities via federal grants and agreements, allowing technology to be commercialized. For over 40 years, the federal government has promoted tech transfer, beginning with the Stevenson-Wydler Technology Innovation Act of 1980, which required federal labs to budget for tech transfer activities. The Bayh-Dole Act incentivized the commercial use of federally funded research by allowing non-government actors to hold patents. The Federal Technology Transfer Act established the Federal Laboratory Consortium and Cooperative Research and Development Agreements (CRADAs). The National Technology Transfer and Advancement Act of 1995 improved intellectual property protections for commercializing CRADA inventions.
The Small Business Innovation Research and Small Business Technology Transfer programs provide early-stage capital for technology commercialization, assisting small businesses with research and development funding and allowing them to retain intellectual property rights.
Tech Transfer as Business Risk
Certain restrictive tech transfer statutes and regulations impose enforceable obligations on American businesses. This includes American subsidiaries of foreign corporations, such as BAE Systems, Inc. (formerly BAE Systems North America). The International Trafficking in Arms Regulation (ITAR), Export Administration Regulations (EAR), and Foreign Military Sales (FMS) statutes create enforceable export control obligations. These authorities prescribe constraints on export not only on companies engaged in defense industry, but also on a wider range of technology and research companies than one might imagine. It’s obvious companies like Lockheed Martin and Raytheon have export control obligations. It’s less intuitive that the obligation can extend, in certain circumstances, to companies like Microsoft, General Motors, and Dow Chemical, as well as their customers, supply chain component manufacturers and service providers.
Noncompliance can lead to investigations, fines, prosecutions and reputational damage. Companies must consider export destinations and foreign customers’ ability to retransfer products to unauthorized recipients. Here is a brief summery of the regulations and obligations of which businesses involved in tech transfer should be aware:
ITAR
ITAR, administered by the Department of State, governs defense articles and services, including technical data and certain commodities. Companies in data analytics, AI, autonomy, shipbuilding, and space systems should pay particular attention. Items on the U.S. Munitions List (USML) require a license for export. Violations can be costly, as seen in Boeing’s recent $51M fine.
EAR
EAR, under the Department of Commerce, covers sensitive goods not subject to ITAR. The Bureau of Industry and Security (BIS) administers the Commerce Control List (CCL), regulating dual-use items. BIS issues licenses upon proper application.
Foreign Military Sales
The FMS program regulates transactions between U.S. defense companies and foreign governments, embedding tech transfer and disclosure standards. FMS transactions are exempt from export
license requirements.
Sanctions
Several states are on the U.S. Sanctions list, including Cuba, North Korea, Crimea, Iran, Syria, and Russia. Export compliance is crucial, and companies must ensure sanctions compliance for both exports and re-exports. Prompt consultation with legal counsel can mitigate legal and reputational consequences.
A Mature System
Tech Transfer represents both risk and opportunity. Risks can be managed with diligent processes guided by competent advice. The opportunities require positioning and matchmaking between federal research being conducted and opportunities for commercialization. The ecosphere represents a mature system for controlling foreign access to important U.S. information, data, and products, while promoting innovation, utilizing federal funding to give commercialization a running start.
Senior Contracts Counsel Robert Bracknell smiling for a portrait in the Continuous Electron Beam Accelerator Facility (CEBAF) at Jefferson Lab in Newport News, Va., July 31, 2024. (Lindsay Cunningham | Jefferson Lab)
Butch Bracknell is senior counsel at the Thomas Jefferson National Accelerator in Newport News. Previously he was a counsel with Norfolk’s Crenshaw, Ware and Martin PLC and the North Atlantic Treaty Organization’s Allied Command Transformation. He spent 22 years on active duty in the U.S. Marine Corps. Butch is a graduate of UNC, Maryland Law (JD), Harvard Law (LLM), and the University of Oxford (MSc).
