New Biotech Software Controls Could Have 'Significant' Industry, CFIUS Implications, Firms Say

The U.S.’s new export restrictions over certain biological equipment software could have a major impact on life science companies, universities and research organizations, and could present significant foreign investment screening hurdles, law firms said. While the restrictions were issued multilaterally and will only seek to stop certain software exports that can be exploited for biological weapons purposes, firms warned that the new restrictions could still be difficult to manage.

The new license requirements, issued by BIS in a final rule last week (see 2110040009) and also adopted by the multilateral Australia Group, will restrict exports of “nucleic acid assembler and synthesizer” software “capable of designing and building functional genetic elements from digital sequence data.”

Even though those exports can be “misused for biological weapons purposes,” Thompson Hine said Oct. 5 they also have “substantial beneficial civilian applications.” Foley Hoag said the rule “could significantly impact life sciences companies” and other entities, even if they are only exporting the software to non-restricted destinations.

Companies should be aware that the restrictions have deemed export implications, which prohibits U.S. companies from sharing certain technologies or controlled items with a foreign employee in the U.S. if an export application would normally be required to export to that foreign person’s country, Foley Hoag said. Those deemed export restrictions also apply to “source code,” the firm said Oct. 8. “An export license may be required to provide access to the software or technology to a foreign-person employee, student, or contractor, even if the individual is based in the U.S.,” Foley Hoag said.

And because the software was added to the Commerce Control List as an emerging technology, foreign investment transactions involving the software may now trigger a review by the Committee on Foreign Investment in the U.S., Fenwick said Oct. 5. CFIUS’s jurisdiction was expanded last year to cover transactions involving critical technologies, which includes any emerging and foundational technologies controlled by BIS under the Export Control Reform Act (see 2001140060).

“These new export license requirements on genetic editing software or technology for (chemical and biological weapons) reasons will be considered ‘critical technologies,’” Fenwick said, which could lead to mandatory CFIUS filings. The firm said the new control could specifically impact investment acquisitions of U.S. biotechnology companies with genetic editing software or technology. “Going forward,” Fenwick said, “biotech companies involved in critical technologies in the U.S. should closely analyze future foreign investment or transactions opportunities with these CFIUS implications in mind.”