In a highly unusual move, the federal Bureau of Industry and Security is asking U.S. industry to help identify emerging technologies that are essential to national security but currently escape the tangle of laws and regulations that govern — and in some cases restrict or prohibit — the sale or transfer of commodities, technology, and technical data to foreign businesses, research institutions, government and private organizations, and individuals who are neither U.S. citizens nor lawful permanent residents.
The bureau’s advance notice of proposed rulemaking specifically mentions categories of emerging technology that ought to deeply interest STAT readers: nanobiology, synthetic biology, genomic and genetic engineering, neurotechnology, molecular robotics, neural networks and deep learning, evolution and genetic computation, direct neural interfaces, brain-machine interfaces, and biomaterials.
This notice from the bureau represents a new era. Emerging technologies essential to national security used to come mainly from government labs and research institutes, affording the government time to assess their potential and capabilities. That’s no longer the case. Emerging technologies now come almost exclusively from the private sector. Asking industry to identify emerging technologies acknowledges that the government is no longer pushing the state of the art.
The notice also represents a singular opportunity for life science, pharmaceutical, biotechnology, and health care companies to shape their fates and that of these sectors. If your company does business in this space, it ought to consider collaborating with a relevant industry group and competent counsel to weigh in before the recently extended comment period ends on Jan. 10, 2019.
Export control is pure realpolitik, devoid of moral and ethical premise. The U.S. government controls the export of items to promote national security interests and foreign policy objectives. That seems simple and intuitive enough until you consider that we are in uncharted waters, in which our largest economic trading partner — China — is also our most significant military and geopolitical adversary.
We can all respect the natural tension at work here: the business community seeks to engage in unimpeded international trade, thereby ensuring access to the best R&D and predictability in supply chains and sales. Government, on the other hand, seeks to impose controls on items, services, and technologies that could offer a competitive edge to our military and strategic adversaries while still ensuring trade and interoperability with our military and commercial partners.
The less control the federal government exerts over emerging technologies, the more likely they will contribute to the military potential of our adversaries. The more control it exerts, the greater the potential detriment on segments of our economy.
Unlike most STAT readers and contributors, I barely know the difference between a genotype and a phenotype. But as an export control attorney who represents biotech and life sciences companies in their dealings with the federal government and foreign buyers and investors, I know a lot about what is necessary to help companies classify, license, and protect their technologies from release to so-called foreign persons.
The bureau’s request for comments is too sudden for there to be a set of Frequently Asked Questions (FAQ). But here are a few QTSBAs (questions that should be asked) by companies with emerging technologies:
Does asking for these comments make sense? The Bureau of Industry and Security is seeking help setting the criteria for emerging technologies; it isn’t asking industry to help set the boundaries of government oversight of their products, which would be akin to having parents ask their kids what the kids’ bedtimes should be. No one better understands these technologies, their potential, and their scope than the folks who birthed them. Without comment from industry, the government could overreach in its regulations.
What are the risks and benefits to identifying my technology as essential to national security? If a company identifies its emerging technology as essential to national security, it will likely fall under export control. Technologies identified in export control regulations as emerging will also be considered “critical technologies” under new federal laws. Critical technologies require authorization from the Bureau of Industry and Standards before their release or sale to foreign persons, as well as advance review of investments by foreign investors by the Treasury Department’s Committee on Foreign Investment in the United States.
There are, however, potential rewards. Emerging technologies that are essential to our national security are highly marketable and generate keen interest from the U.S. government, which is the largest potential customer in the world. If an entity is a sole source of such emerging technologies, it can reap even bigger rewards.
If you view your product as nonessential, should you say so or remain silent? View this exercise as an earnest attempt by the bureau to obtain expert feedback from industry. Government agencies are staffed mostly by nonscientists, and providing comment ought to allow industry to help shape the regulatory framework.
Is there language to use or avoid in a comment? There is no one-size-fits-all answer to that because the entire exercise is highly fact-specific, depending on what technologies you develop or sell, your business goals and tactics, and other factors. The key is to collaborate with an industry group or counsel to help craft the comment.
Will companies use this comment period to damage competitors? The emerging technology space is hypercompetitive, and companies are always on the lookout to seize any advantage, real or perceived. It’s possible that a company could use the process to identify a competing technology as essential to national security, and thus subject it to restrictions, but the comments are public and doing so would represent a truly cynical approach given the collective stake we should all have in our nation’s security.
What are the stakes? The stakes are immense if you work in one of the categories of biotech emerging technologies the bureau has identified, especially if your business model relies at least partially on relatively open international collaboration or your sources of capital include foreign investment.
Move swiftly — and carefully.
Zack Hadzismajlovic is a New York City-based partner at the law firm McCarter & English, where he advises clients in technology and other sectors on international trade, export controls, and customs matters.