Insights: Navigating Export Control Challenges in a Globalized IP Market
IP Business Management
March 19, 2025
When your IP department receives a request to file a patent application for an invention, export regulations may not be top of mind. But with so many companies doing business across borders, a company can easily run afoul of export control regulations.
Anaqua recently hosted a webinar with Megan Lew, Of Counsel at Cravath, Swaine & Moore LLP, and Maria Sova, IP Law Systems Manager at IBM. The conversation covered the basics of export control along with real-life examples. In this blog, we break down those lessons, with tips on how to navigate the complex world of export control.
What are export controls?
Many national governments, including the United States, impose requirements on the export of goods and technology. These include limitations on the products and information that can be provided to foreign countries, organizations, and people. Export controls are in place to help protect national security and foreign policy interests.
In the U.S., the Department of Commerce’s Bureau of Industry and Security (BIS) primarily administers export controls under a set of rules called the Export Administration Regulations (EAR).
Which products are subject to U.S. export control regulations?
During the webinar, Megan Lew discussed three main categories:
- U.S. origin: These are items manufactured in the U.S. or physically located in the U.S.
- Foreign items with U.S. content: When an item is manufactured outside of the U.S. with more than de minimis U.S.-controlled content, it is subject to the EAR regulations. According to Lew, the threshold is more than 25% total U.S. content out of the value of the overall product.
- Foreign Direct Product Rule (FDPR): This rule was introduced in 1959 to help control trading of U.S. technologies. The Bureau of Industry & Security defines FDPR to include U.S. items overseas, and items produced overseas that use U.S.-origin components or are made using U.S. technology. These items may still be subject to the Export Administration Regulations.
Tip: The EAR regulations follow the products. Lew noted, “The EAR continues to apply to these items wherever they wind up in the world.”
Which activities are covered under U.S. export control regulations?
As the name implies, export controls govern exports. But the whole picture isn’t quite that straightforward. Lew discussed four covered activities:
- Export: This includes both the shipment of products from the U.S. to another country and the transmission of certain information. For example, a covered transmission could be emailing blueprints to a recipient outside the U.S.
- Re-export: Re-export is the shipment or transmission from one foreign country to another.
- In-country transfer: This means the transfer to a different person within the same foreign country, or a change in the end use. “If you're using the item for a different purpose while in the same foreign country, that’s also considered an in-country transfer,” Lew stated.
- Deemed export: A technology shared with a non-U.S. citizen within the U.S. is called a deemed export.
Tip: Intra-company transfers are also covered under the above four export activities by EAR. According to Lew, “All of these rules still apply even if you're dealing with a foreign subsidiary of your own company or a branch office or a foreign employee of your own company... That's a key area to be aware of even when dealing with your fellow colleagues who are foreign citizens or located abroad in a different office.”
What are the penalties under U.S. export control regulations?
If a company exports products or technology to restricted countries or entities, or to certain individuals, a license may be required. Civil and criminal penalties exist for non-compliance. Criminal penalties include up to 20 years in prison and/or up to $1 million fines per violation. Civil penalties can reach the greater of $300,000 or twice the value of the transaction. In 2023, BIS imposed a $300 million penalty – the largest standalone administrative penalty in the office’s history – for export control violations with a restricted entity.
Lew noted that BIS encourages companies to self-report if they later discover they did not obtain a required license. If the offense is minor, BIS might issue a no-action letter or a warning letter stating that no penalties are being imposed. Many companies settle with BIS for more serious offenses after receiving a charging letter. However, the most egregious offenses, particularly those committed with intent, may be referred to the Department of Justice for criminal action.
Challenges and solutions for IP professionals
You may be faced with managing an increasing volume of data and sensitive material. It can be difficult to find the time to review your company’s export control procedures until a crisis arises. But export control compliance should begin well before a single product is shipped.
As Maria Sova described during the webinar, IBM’s review process starts with an overview of the proposed invention. Depending on the technology and other factors, an invention may be flagged for potential export control issues. When that happens, security measures are automatically applied pending further review. Export control experts in the relevant department then further evaluate the matter to decide whether security measures should stay in place.
Throughout this process, IBM uses Anaqua’s AQX® IP management platform to control the flow of information. The AQX platform allows companies to configure security measures and restrict access. If necessary, Anaqua will assign a dedicated U.S.-only support team to ensure compliance with U.S. export control regulations.
Anaqua provides the technology and support to meet the compliance requirements for export controlled intellectual property through its export control knowledge and the capabilities of the AQX platform.
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