U.S. Export Controls on Internet Software Transactions

• Published in: The International lawyer Vol. 44; no. 2; pp. 857 - 870
• Main Author: McKenzie, John F.
• Format: Journal Article
• Language: English
• Published: Chicago Section of International Law and Practice of the American Bar Association 22.06.2010; American Bar Association
• Subjects: Business models; Cloud computing; Commerce; Computer software; Customer services; Data encryption; Electronic commerce; Export controls; Exporters; Exports; Industrial products; Industrial security; Internet; Laws, regulations and rules; Legal entities; Magnetic tape; Software; Software applications; Software industry; Software services; United States > US
• ISSN: 0020-7810; 2169-6578

This article examines the legal responsibilities under the U.S. export control program for software vendors that provide software products over the Internet and other companies offenng computing and data processing services under "software as a service" or "cloud computing" business models. The regulations implementing this export control program restrict the "export" of certain categories of commercial software products, especially products with data encryption functions and features, and define the concept of "export" extremely broadly to include a wide range of intangible transactions. Similarly, the regulations impose legal duties on software vendors and service providers to prevent their products and services from falling into the hands of persons and entities located in countries subject to U.S. trade embargoes, proscribed parties (such as international terrorists), and entities engaged in the proliferation of weapons of mass destruction. This article suggests steps that software vendors and service providers may (and must) take in order to resolve or mitigate the tensions and to address the unique compliance challenges presented by the intersection of strict regulatory duties and the global and semi-anonymous nature of Internet software transactions and cloud computing.