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Higher Education, Intellectual Property and Export Controls

Why Universities Need to Protect Intellectual Property and Ensure Ongoing Export Compliance

Universities, like commercial enterprises, need systems to prevent the loss of intellectual property and compliance missteps. In this QAD Precision Report we look at how universities can address these critical issues.

This April, the Japanese government announced plans to formulate guidelines for universities that collaborate with foreign companies on joint research projects. Japan’s government will ask institutes of higher education to develop legal compliance systems to prevent technology drain.

Technology drain can happen when an organization — or a university — does not protect their intellectual property (IP). This can occur because an organization fails to patent research, as well as through theft, negligence or by accident. University IP can include research papers, computer code, samples, living tissues and cells, prototypes, teaching materials and so forth.

Furthermore, if a university works with a foreign partner and violates compliance regulations, the institution could face penalties by the domestic government and the government of its partner. A university research project that uses materials or technologies supplied by overseas researchers, institutions, companies or government bodies, must comply with foreign as well as domestic export controls and licensing requirements.

Japan — like many countries and political entities, including the United States, China and the European Union — already has export controls in place for military applications, sensitive technologies and dual-use goods. These laws apply to universities as well as private enterprises. However, while companies and government bodies have systems in place to mitigate compliance violations, universities often lack integrated and institute-wide controls.

Separate laboratories, schools, faculties and departments at universities are often responsible for managing their own research information. If they lack knowledge around confidentiality and export rules — and if the university does not have clear processes in place — researchers may violate export controls or fail to protect valuable IP.

Intellectual Property and Export Controls

Partnerships between universities and companies, government bodies or foreign academics can be fruitful. Nonetheless, these collaborations also bring challenges and risks. Therefore, universities must put systems in place to prevent compliance missteps and protect IP.

Japan is certainly not the only country that wishes to protect the IP resulting from university research projects. The US and China have both increased regulation for universities engaging in research with foreign partners, particularly on dual use and military technologies.

It is unsurprising that governments wish to prevent military and dual use goods falling into the hands of criminals, terrorists or foreign governments. However, there are other goods, technologies and research that universities may wish to restrict in order to protect IP and prevent technology drain. Lack of clear processes, institute-wide controls, and knowledge around export controls can all contribute to technology drain.

What is an Export?

When most of us think of an “export” we imagine the physical shipment of goods from one country to another, generally for commercial purposes. This is an export, but the term is broader than that. The following five examples are all exports.

  1. The shipment or transfer of physical items overseas

  2. Carrying information to a foreign country on a laptop, external drive, USB device or similar

  3. Electronic transfer of information via email or text message, or by uploading data to a foreign server and so forth

  4. Providing access to software, databases and so forth to foreign nationals

  5. Telephone or other communications

As you can see from the above, sharing information across borders is legally the same as transferring physical goods. In the United States, a “deemed export” is the sharing of information or technology with a foreign national who is also in the US. In such a case, the information or goods may not have left US soil, but since the recipient is a foreign national, US authorities regard this as an export. As a result, publishing sensitive university research or discussing it at a conference could also be a violation of export controls.

Dual Use Goods

Laws regarding dual use goods restrict the export of items or technologies that have both commercial and military applications. Examples include chemicals, electronics, navigation or propulsion systems, lasers, sensors and nuclear power technologies. Exporters — including universities — may need authorization or a license before they can ship certain dual use goods. By issuing licences, governments are able to track the movement of these goods.

Depending on where they are, who they collaborate with, and the nature of their research, universities may need to comply with dual use restrictions set out by a number of different government bodies.

For example, in the US, the Export Administration Regulations (EAR) controls the export of commercial and dual use items. In addition to EAR, the International Traffic in Arms Regulations (ITAR) control the manufacture, export, import and so forth of military goods and technologies.

The European Union has similar controls. Regulation (EC) No 428/2009 governs the EU’s export controls. The regulation creates a common list of technologies that are subject to control. EU member states may control additional items in certain circumstances, subject to European Parliament approval. Similarly, Japan’s Foreign Exchange and Foreign Trade Act oversees Japanese import and export controls, including dual use items.

Violations of these laws can result in significant penalties. A university based in the EU and collaborating with a US company would therefore be subject to both EU and US export controls.

Fundamental Research vs Proprietary Research

Most fundamental research is not subject to export controls. In the US, this is known as the Fundamental Research Exclusion (FRE). Fundamental research is basic and applied research, the results of which are to be published and shared in the public domain with the scientific community. Technical data that is the result of fundamental research is not subject to export controls. For FRE to apply, the researcher must:

  • Be undertaking fundamental research

  • Intend to publish

  • Is not subject to publication or other access restrictions (such as by signing a non-disclosure agreement or requiring approval by sponsors

FRE only applies to publishable results — not to inventions or equipment. However, certain research, such as in STEM fields (science, technology, engineering and mathematics) may overlap with export controlled technologies.

FRE does not apply if a university or a research signs a non-disclosure agreement or accepts other restrictions from a sponsor, such a government body or commercial enterprise. This is proprietary research. Proprietary research is generally restricted for commercial or national security reasons.

What Can Universities Do?

Universities need to take steps to ensure that researchers and staff do not violate export controls or allow sensitive IP to fall into unauthorized hands.

The IP that universities create can be both intellectually and financially valuable. By obtaining patents on their research and licensing these for use in commercial applications, universities have a valuable avenue to increase their revenues. However, in order to do this, universities and their researchers — including graduate students — need to protect this research.

Students may not realize that their research has commercial potential. They also need to know how to protect IP. If students and researchers publish data or release prototypes of inventions, universities may not be able to realize the gains from the commercial potential of this IP.

EDUCATE RESEARCHERS ABOUT IP & EXPORT CONTROLS

The first step in any compliance program is education. Any organization, whether educational, commercial or governmental, needs to ensure that personnel are aware of export regulations and the penalties for violations.

University researchers — many of whom are graduate students — must understand the importance of protecting their work. Students, particularly in STEM fields, need to be aware that disclosing sensitive information, in person or electronically, may violate export regulations.

The vast majority of data breaches are unintentional. These include accidentally emailing or posting confidential information to the wrong recipient; careless handling of data; weak passwords or loss of devices with sensitive information.

IMPLEMENT A SECURITY POLICY

Any organization that has access to confidential information or IP needs a clear security policy. The policy should clearly explain the rules and regulations governing data handling. All staff should be familiar with procedures and they should be strictly enforced.

Universities can also take steps to ensure that their systems are secure and that data cannot be copied onto external drives or accessed by outside actors.

AUTOMATE COMPLIANCE SCREENING AS STANDARD

If university personnel ship samples, research materials and sensitive data to colleagues — whether locally or internationally — compliance screening is crucial.

Universities should introduce institution-wide controls to integrate automated compliance checks with shipping. As a result, all shipments are screened before they are cleared for transportation.

Automated compliance screening will ensure that research materials are not been sent to sanctioned countries or denied parties. Government and international bodies publish lists of individuals, entities and groups with whom it is illegal to trade. These denied party lists (DPLs) are subject to thousands of changes every year. It is, therefore, extremely challenging to screen shipments manually and still remain compliant.  

An automated compliance solution will vet every shipment to ensure it can proceed. This includes DPL screening, determining end use, validating the country of destination and ensuring that any special documentation or actions are included. As a result, researchers and university staff will perform due diligence, and create an electronic audit trail to ensure the university has audit-ready records.

A comprehensive integrated solution will ensure that all your shipments are compliant with export controls, that all relevant transportation documentation is included, and enforce best practices across the institution.

INTRODUCE CAMPUS-WIDE SHIPPING PROCEDURES

If researchers are shipping samples that are time-sensitive, delicate, hazardous or require special handling, they must ensure that their packages are compliant with a carrier’s requirements. If not, these shipments may be delayed, lost or destroyed.

Furthermore, if researchers are sending international shipments they will need knowledge of import tariffs, packaging specifications, customs rules and compliance regulations. Desktop shipping solutions simplify this process and ensure that university rules, carrier specifications and export regulations are all met before a package can be released to a carrier.

Desktop shipping also allows university staff to seamlessly switch between carriers. In addition, desktop shipping software automates carrier compliant labeling, generates the appropriate shipping documentation for global destinations and manages denied party screening — all while using standardized procedures in line with the university’s specific shipping rules. Universities can thus use a single integrated system for compliance checks and shipping. This saves time as there is no need to alternate between systems, and prevents keystroke errors from having to re-enter information.

A university shipping solution must be able to handle the complexities of the research chain. Universities ship highly diverse contents, including living cells, common or experimental drugs and solvents, specimens, text books and research data. As universities work with increasing numbers of foreign partners, and as the regulatory environment becomes ever more tightly controlled, universities must improve their shipping processes, meet all export controls and protect their hard won IP.

About QAD Precision – Trusted Global Trade and Transportation Execution

QAD Precision (Precision Software), a division of QAD Inc., provides industry-leading global trade management, transportation execution and multi carrier shipping software solutions from a single, integrated platform. Preeminent industry leaders in every region of the world rely on QAD Precision’s global support centers to leverage thousands of carriers and manage millions of shipping transactions every day. Our open architecture easily integrates with Enterprise Resource Planning, Warehouse Management Systems and legacy solutions. An ISO-certified company, QAD Precision assists companies to minimize shipping costs, optimize first mile and last mile deliveries, automate free trade agreement compliance, avoid customs delays and mitigate the risks associated with dynamic trading environments to maximize their competitive advantage. QAD Precision’s customers span multiple industries including banking and finance, life sciences, high technology, retail, industrial, automotive, higher education and public sector as well as logistics providers. For more information about QAD Precision, visit www.qadprecision.com.

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