November 27, 2018

Developers Should Keep Watch As U.S. Reviews Controls For Emerging Technologies.

Every developer should keep a close watch on the United States' request for Review of Controls for Certain Emerging Software Technology. Recent computing advancements such as artificial intelligence could soon require strict licensing.

This past November in 2018, an official request for public comment was published in the U.S. Federal Register asking whether a long list of emerging and soon-to-be common place software technologies should be subject to stricter export-control rules. Every developer in the Western hemisphere should be very alarmed as this notice is a forewarning that all recent computing advancements such as artificial intelligence, machine learning and image recognition “could” potentially require an export license if they are included within a product you or your company intends to sell on the global market.

The Federal Register is the United States government’s official journal of government agency rules, proposed rules, and all public notices. Its main purpose is to provide a means for the U.S government to announce to the general public potential changes to government requirements, policies, and guidance.

While I won’t point fingers or start attacking and condemning the Trump administration, I will instead highlight the seriousness of this most recent request and it’s potential impact on the entire tech industry. This latest posting in the Federal Register could be devastating to small and mid-level businesses nation wide. Potential export-control would stifle global market access for nearly all “indie” developers. Small firms would feel the impact as well if they are leveraging targeted technologies as part of their core product offering or are simply a company trying to keep up with the current pace of the today’s tech industry.

A few of the technologies included in the Federal Register request include:

  1. Artificial intelligence
  2. Machine Learning and Neural Networks
  3. Computer vision (e.g., object recognition, image understanding)
  4. Speech and audio processing (e.g., speech recognition)
  5. Natural language processing (e.g., machine translation)
  6. Advanced surveillance technologies, such as Faceprint and voiceprint technologies.

The listing is vast, and targets a lot of key software already utilized in everyday consumer products. From face recognition and Apple’s Face ID, to augmented reality and Tensor Flow’s neural networks.

What’s worse is the review request could trigger a chain reaction of government overview. The Export Control Reform Act (ECRA) mandates that all technologies identified as “emerging and foundational” must at a minimum require a license for their export, re-export, or transfer to or in a country subject to a U.S. embargo or an arms embargo. 1

Furthermore, technology designated as “emerging and foundational” also is considered “critical technology” that may trigger a review by the Committee on Foreign Investment in the United States or (CFIUS) to determine whether transactions involving these technologies would threaten to impair U.S. national security.2 Could this go so far as to require national security clearance in order for developers to utilize image recognition or facial detection libraries within their mobile apps?

Export license requirements are not a “pay once” endeavor. If put in place, they would require purchasing a license for each individual country where you intend to sell your software and services. In some cases, instead of an export license requirement, the mandate may require you to have to pay an additional tax in order to sell your products outside the U.S.

I understand that by definition ALL goods and services sold to any country outside the United States is classified as an export. I also understand that the U.S. Constitution grants Congress the authority to regulate and tax international imports and exports.

However, as a mobile software developer my global market store costs could move up to nearly 50% of my initial sale. Estimated after giving Google and Apple their required 30% for sales utilizing their mobile market places, but now factoring an additional 20% for potential licensing fees for sales outside of the U.S. What about non-profit organizations that may be leveraging AI or ML tools to facilitate and organize research? How would these tighter restrictions affect their yearly goals, outreach initiatives and future funding?

The export controls review is scheduled to be open for submissions until December 19, 2018. I will certainly keep a close watch on the outcome, and an even closer eye on everything that follows.

  1. Find out more about the Export Control Act at www.skadden.com

  2. Read more about the CFIUS overview process here

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