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Defence export controls (limitations on exporting “sensitive” Australian technologies) and intellectual property (especially patents) have been linked for the best part of a decade. A 2018 review predicated on strengthening the restrictions appeared to go nowhere – that is, until an interesting article in this morning’s Guardian hinted that tightening the laws is still very much on the cards.
Local inventors (and indeed, patent attorneys) may think “so what? Unless I’m looking to patent a weapon, how is this remotely relevant to me?” Well, if your invention falls into what’s termed the “dual use” category – inventions having potential downstream military application (and it’s the Government that decides this – not you, and not us), then please read on…
The status quo
The Defence Trade Controls Amendment Act 2015 entered into Australian federal law on 16 May 2015 and amended the original Defence Trade Controls Act 2012 (“the DTC Act”). The (criminal) sanctions for non-compliance took effect from 2 April 2016. In regulating the extent to which one can communicate new technologies overseas – and in providing criminal sanctions for non-compliance, the legislation stands to impact significantly upon the day-to-day activities of Australian patent attorneys – and their clients. On this basis, the fact that defence export controls has raised its head again places this little-known piece of legislation squarely in the public eye and provides an opportunity to issue a reminder as to the scope and significance of the DTC Act.
Criminal sanctions for non-compliance with the restrictions
The DTC Act regulates the overseas supply and publication of Defence and Strategic Goods List (DSGL) technologies and the brokering of DSGL goods and technology.
Shelston IP actually worked closely with Defence Export Controls (DEC) throughout the 2015 public consultation process, and as a consequence, our internal systems have been fully compliant with the restrictions imposed for the best part of five years. In short, when dealing with Shelston IP, local clients can rest assured that we fully understand the situation and will have taken the necessary steps to minimise any risks to the parties involved.
Communicating technology – restrictions on our “day jobs”
As patent attorneys, the communication and publication of “technology” is a staple of our everyday work. Often, such communications are sent offshore. Other times, we communicate new technologies in the form of patent specifications to our local clients, who in turn, send these documents overseas. Depending on the nature of the “technology”, the DTC Act stands to criminalise such activities.
Because the offence provisions for supplying and publishing DSGL technology and for brokering DSGL goods and technology took effect from 2 April 2016, individuals and organisations are required to seek permits for any otherwise-offending activities.
Why have export controls in the first place?
The DTC Act is a little-known document having significant, wide-reaching consequences. Australia’s export control system aims to stop goods and technologies that can be used in military applications from being transferred to individuals, states or groups of proliferation concern. As a member of various international export control regimes, Australia is part of a global effort to regulate the export of items of concern, many of which have potential terrorism or weapons of mass destruction applications.
Australia already regulates the physical export of certain military and dual‐use items under Regulation 13E of the Customs (Prohibited Exports) Regulations 1958. However, the DTC Act is Australia’s means of closing any gaps that have appeared in the interim (as required by the Wassenaar Arrangement, to which Australia is a signatory).
Accordingly, the DTC Act regulates three main activities:
- The intangible supply (transmission by non‐physical means, such as e-mail) of controlled technology from a person in Australia to a person outside of Australia;
- Publishing controlled military technology; and
- Brokering (akin to enabling another to communicate overseas) controlled military goods or technology.
How do I know if my technology is covered under the DTC Act?
The DTC Act applies to different stakeholders, depending on whether their activities involve military or “dual‐use” items listed in the Defence and Strategic Goods List (DSGL). The DSGL, accessible here, is a 338-page legislative instrument defining as “dual use” a broad range of otherwise fairly benign-sounding technologies. As such, one could assume (fairly reasonably) that a technology was exempt on the basis that it had no immediate or apparent primary military end use. However, as noted above, it’s the Government that has the final say by way of the DSGL listing being the sole arbiter. It is important to note that secondary or incidental military applications may suffice, hence the term “dual use” technologies.
International export control regimes are generally conscious of their impact upon people’s day-to-day activities, and so the controls are designed to only capture what is considered necessary. For example, the DSGL lists computers that are specifically designed to operate below ‐45 °C or above 85 °C. The DTC Act controls only apply to the technology which is necessary for the computer to operate at these extreme temperatures. Technology that does not influence the computer’s ability to function at these temperatures is not controlled. Using the above example, an Australian inventor who has created such technology for the primary purpose of, say, exploring the surface of Mars, would need to be acutely aware of the restrictions imposed by the DTC Act – as would his/her patent attorneys.
All things in perspective…
As mentioned, the offence provisions specified in the DTC Act came into force from 2 April 2016. Although the sanctions for non-compliance are criminal in nature, this should be tempered with the knowledge that being hit with the full extent of the sanctions (10 years’ imprisonment) would require prosecutors to prove the requisite levels of intent, knowledge, recklessness and negligence. The operation of the Criminal Code Act 1995 means that a person who mistakenly supplies, publishes or brokers controlled technology contrary to the DTC Act after diligently following institutional compliance processes would be unlikely to be prosecuted, much less to the full extent of the law. The Code applies general principles of criminal responsibility to Commonwealth offences; in particular, the knowledge requirement is akin to having received fair warning.
If the goods or technology at issue are listed in the DSGL, a permit or approval may be required from DECO. The qualifier “may” is dependent upon:
- The activity being undertaken (“supply”, “brokering”, or “publication”); and
- Whether it is a military or a “dual‐use” DSGL technology; and
- Whether an exemption applies (such as “basic scientific research” or material that has been lawfully placed into the public domain).
As readers will appreciate, a simple “yes/no” answer as to whether a permit is likely to be required is necessarily dependent upon the unique circumstances that each scenario presents.
As mentioned, a staple of our day-to-day activities as patent attorneys is the exchange of information relating to “technology”. On a daily basis we communicate technology internally, domestically and internationally – and our clients do the same. It is useful, therefore, to understand the activities that are exempted under the DSGL regulations.
Firstly, the “pre-publication” exemption amounts to recognition, on the Government’s part, that they cannot regulate the publication of information. As such, the communication of information contained in a patent document that will later be published (e.g., a draft convention application or a draft PCT application) appears to fit comfortably within the definition of “pre-publication”. On the other hand, provisional patent applications do not appear to fit within this category – and as such, another exemption must be invoked.
To this end, the “patent application exemption” covers activities “directly related to seeking a patent”:
This exemption applies to the supply of DSGL technology where it is done for the purpose of “seeking a patent” in Australia or overseas. “Seeking a patent” includes lodging a patent application and the supply of DSGL technology to a person or organisation (e.g., a Patent Office, patent attorney, research collaborator or a patent review panel) that is directly associated with the lodging (or potential lodging) of a patent application, or as a result of the patent examination process.
Supply for a purpose that is not directly related to seeking a patent will require a permit (unless other exemptions apply). This includes supply of DSGL technology to a research collaborator located overseas before a decision is made to seek a patent. Once a provisional patent application is filed, any supplies of DSGL technology to further develop an invention prior to preparing/submitting a complete patent application will require a permit. Supplies of DSGL technology to locate investors and determine overseas markets (including forwarding a recently-filed provisional application) will require a permit.
The process of publishing a patent (or an unsuccessful application) into the public domain is covered by this exemption. Until such time as that information exists in the public domain, it is still controlled and would require a permit to be supplied if it is not for the purpose of “seeking a patent” and no other exemptions applied.
As such, the Government would appear to have intentionally extricated the acts of overseas communication for the purposes of preparing a patent application (exempt) and communication with a view to ancillary business activities such as seeking investor funding (not exempt).
We will keep abreast of any changes to, or unusual interpretations of this new exemption. As it is, it is clearly important to the manner in which we – and our clients – go about our everyday professional activities.
Shelston IP’s proactive approach to the DTC Act restrictions
Being aware of the potential impact of the DTC Act, Shelston IP has closely monitored progress throughout the public consultation process (dating back to 2014). We have liaised with DEC on a regular basis and have developed an internal best practice guide. Adherence to such best practice will protect not only our interests, but also those of our clients. This, in turn, means that clients dealing in controlled or dual-use technologies can be assured that their interests are in safe hands.
Based on our experience and understanding, compliance with the DTC Act can be as easy as following a few simple rules. In some instances, a deeper consideration of the specific circumstances and legislative requirements will be necessary. Those concerned about their own internal procedures under the DTC Act are invited to make contact with their Shelston IP patent attorney.
Our specialist patent searcher, Frazer McLennan, is an expert in assessing technologies against what is prescribed in the DSGL register.
Authored by Gareth Dixon, PhD and Frazer McLennan