U.S. APPEAL COURT RULING TO EXPAND HIGH-TECH LICENSING REQUIREMENTS

24 Nov 04. THE WALL STREET JOURNAL reported that high-technology exporters are alarmed by a recent U.S. Appeals Court ruling that threatens to sharply expand the number of products that need to get Commerce Department export licenses for security reasons. They say the ruling could impose new burdens on high-technology exports at a time the U.S. is suffering from burgeoning trade deficits.

The ruling, backing the U.S. government position, comes in a 1990s case involving the shipment to India of a control panel for a small industrial press for shaping materials. The government contended that even though the press was legal, the control panel also was designed to work with larger presses that are suitable for making parts for missiles or nuclear bombs. It said it was illegal for the manufacturer to ship it without a license.

The ruling, by the First Circuit Court of Appeals in Boston, reversed a lower court finding that the Commerce Department regulations were unconstitutionally vague. The Appeals Court said the regulation — requiring licenses for parts “specially designed” to be used with licensed equipment — encompassed any parts, even if they also could be used with unlicensed devices. Judge Timothy Dyk wrote in his opinion that a license is required, “whether the item is designed exclusively for this purpose or whether it is capable of serving other functions as well.”

The Industry Coalition on Technology Transfer, a trade group of semiconductor and semiconductor-equipment makers, filed an amicus brief with the court, urging a rehearing. “The decision will upset the long-settled understanding [of the regulation], and will require that export licenses be obtained for many items that never have been treated — by the government or by industry — as requiring licenses,” the group wrote.

According to the group, about 15,000 exports annually require licenses today. But it said that under the ruling, the number could soar to around 80,000 a year, which was the norm in the 1970s before the U.S. reached an international agreement on export controls with its European allies and Japan. Applying for and receiving a license typically takes two months, according to the group.
The government had brought criminal charges against Walter Lachman of Concord, Mass., and Maurice Subilia of Kennebunkport, Maine, charging that they had violated the export-controls act. According to the government, the men had shipped to India a press that was small enough to avoid the export-control laws. The government said the control panel for the press also was designed to operate a 20-inch press that the customer in India subsequently received from a supplier in Switzerland, where the regulations didn’t apply.

Although the jury found the men guilty as charged in 1995, U.S. District Court Judge Douglas Woodlock, while criticizing the men for “reprehensible conduct,” vacated the verdict after hearing post-trial proceedings. Evidence submitted showed the Commerce Department used various definitions of the phrase “specially designed.” Andrew Good, of Good & Cormier in Boston, who represented Mr. Subilia in the Appeals Court, said he became involved after a German lawyer sent his firm a U.S. document from a German case that contradicted the government position in the Lachman case. “There was no uniform rule,” he said.

Also representing the defendants was Harvard civil-liberties lawyer Alan Dershowitz.