Catching the ‘Tweeners
Addressing Overlapping Legal Issues
Between International Trade & Intellectual Property
J. F. (Jim) Chester
JD, LL.M, CCS, CHB
Chester/Associates, PLLC
Dallas, Texas
March 28, 2008
© Chester/Associates, PLLC 2008

What is a ‘Tweener?
tweener (n) 1. a ball hit between the
outfielders. 2. a softly hit fly ball that
lands just beyond the infield.
SOURCE: Enlexica Dictionary of Baseball
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What is Intellectual Property?
Tangible manifestations of creations
of the mind.
Examples: inventions, literary and artistic
works, and symbols, names, images, and
designs used in commerce.
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What is International Trade Law?
Regulation of the
exchange of goods
and services across
international borders
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What is International Trade Law?
IBT ICL
Weeks/Months Years/Decades
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© Chester/Associates, PLLC 2008

Key Overlap Issues
 Customs Enforcement of IP Rights
 Export Laws
 EAR & Transfers of Technology
 Deemed Exports
 Import Laws (Undeclared Value)
 Assists
 IP License Agreements
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Customs Enforcement of IP Rights
How do IP owners obtain
Customs protection?
How does Customs
enforce IP rights?
Example
“compatible with NOKIA”
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EAR & Transfers of Technology
• What is an Export?
– Physical shipment of EAR-
subject goods, technology, or
technical data outside US
Customs Territory
– Downloads and emails of
technology and technical data
outside US
– Example
• Programming or patent drafting in
India
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Deemed Exports
 What is the Deemed Export Rule?
 “Release”
 “Technology or technical data”
 “Foreign National”
 Example
 Telecom test contractors
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Penalties for EAR Violations
– Up to $1 million
– Up to 5 years in prison
– Denial of export privileges
March 28, 2008
© Chester/Associates, PLLC 2008

International Traffic in Arms Regulation (ITAR)
– “Munitions”
– Include anything manufactured
to “Military Std.” or “Spec.”
– Dual Use
– Encryption
March 28, 2008
© Chester/Associates, PLLC 2008

ITAR Penalties
• Criminal: “Willful” violation:
– Up to $1 million per violation for corporations
– Up to $1 million per violation and up to 10 years
in jail for individuals
• Civil: “Any” Violation:
– Up to $500k per violation for corporations
and/or individuals
• Other Enforcement Measures:
– Seizure or forfeiture of goods
– Debarment from licensing for as long as three
years
– Potential debarment from Government
contracting for up to three years
March 28, 2008
© Chester/Associates, PLLC 2008

Common Importing Pitfalls
– Assists
– Undeclared Values
• Royalties
• Indirect Payments
March 28, 2008
© Chester/Associates, PLLC 2008

Assists
 What are Assists and
how do they affect
import duties?
 What types of IP can
be considered assists?
 Exception – US
developed designs and
tech.
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IP License Agreements
 How do IP license
agreements impact
Customs duties?
 Royalties
 Indirect payment
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• Import Penalties - Civil
– False Statement or Omission
• Domestic value of imported goods
– Record Keeping
• Up to $100,000 per transaction
– Marking
• 10% of domestic value
• Other Customs Enforcement
– Seizure & Forfeiture
– Criminal – 5 yrs; $500,000
– Additional scrutiny, exams & audits
– Referral to other agencies for action
March 28, 2008
© Chester/Associates, PLLC 2008

How to Catch the ‘Tweeners
 Compliance Integration
 Inter-Departmental
Awareness &
Communication
 Use of Outside Experts
 Periodic Compliance
Assessments
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Conclusion
 Failure to catch ‘tweeners can result in:
 lost opportunities
 potential liabilities
 One can budget and plan for compliance;
but not for enforcement.
“The unexamined life. . . .”
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Questions?
Jim Chester
Email JFChester@tradelawfirm.com
Phone 214.800.2845
Chester/Associates, PLLC
6060 NCX, Suite 560
Dallas, Texas 75206
www.tradelawfirm.com
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