Posted on September 12, 2024 by Matthew Mailloux and David Solan
The House of Representatives took important steps this week to protect American interests in the face of hostile actors. Many of the bills passed this week focused on the increasing threat of influence from the Chinese Communist Party. These included a proposal from Rep. Carol Miller (R-WV) to add foreign entity of concern (FEOC) provisions to energy tax credits, protecting American advanced manufacturing.
This is especially relevant as the Department of Energy (DOE)’s cutting-edge research makes it a high-profile target for malicious actors that seek to pilfer U.S. intellectual property. As the pinnacle of America’s world-class energy innovation apparatus, DOE’s unique structure leverages the National Labs and public-private partnerships to deploy breakthrough technologies to address the toughest energy challenges. DOE must advance technological innovation while protecting American Intellectual Property (IP) and its licensure.
DOE frequently issues competitive funding awards through grants and cooperative agreements to industry, universities, state and local governments and nonprofits to implement research, development and technology deployment (RD&D). These awards result in DOE-funded intellectual property that is patented and then sold or licensed to other entities creating opportunities for technology transfer, which can generate large economic benefits to the U.S. provided it is not acquired by foreign entities.
However, such transfers are not without risks. A May 2024 Government Accountability Office (GAO) report, prompted by Sen. John Barrasso (R-WY) and Rep. McMorris Rodgers (R-WA), found that DOE is continuously behind the curve and needs to take critical action to protect the U.S. technological inventions it funds from foreign acquisition. Sen. Barrasso expressed his “deep concern about the ability of the DOE’s research security apparatus to resist threats from the Chinese Communist Party (CCP)” earlier this year in a letter to DOE Secretary Granholm. Sen. Barrasso underscored the imperative for the Department to “remediate its chronic counterintelligence shortcomings” through an effective plan of action.
This level of oversight is appropriate, especially given recent episodes like DOE’s 2022 selection of battery manufacturer Microvast for a $200 million award. The award was made notwithstanding existing DOE prohibitions on awardee participation in Chinese Talent Programs, as the company CEO had done. As a result of vigorous Congressional oversight, the award was later canceled.
To avoid similar stumbles, ClearPath recently provided recommendations that underscore the national economic and security imperative to protect American IP from illicit actors.
DOE can utilize an earlier and improved vetting process while managing new funding and authorities for demonstrations, supply chain and manufacturing. Privately, industry has expressed concerns that DOE has inconsistently applied licensing requirements and waivers, leading to protracted negotiations and project delays. GAO noted in its report that while DOE focuses on flexibility, industry and universities often value clarity and standardization. Such a perceived lack of clarity from DOE could dissuade well-qualified applicants from partnering with DOE for major funding programs. This may also result in a process where only the largest companies and most sophisticated operators with a stable of attorneys can afford to participate in protracted negotiations. It is a delicate balance, but ultimately, as a general principle, DOE should provide well-defined terms and conditions upfront.
DOE should ensure that IP licensing requirements for grants and cooperative agreements from the programs are in alignment with those of the National Laboratories. DOE and the laboratories can make access easier across the DOE complex, thus encouraging more partnerships. In a similar vein, DOE should develop a publicly accessible, no-regrets IP licensing template that is compliant and up-to-date. An awardee that uses the template for licensing its technology will have confidence in relying on parameters blessed by DOE.
To facilitate the advancement of U.S. economic security and technology leadership along with DOE and the organizations it contracts with, ClearPath recommends a combination of short-term goals and a long-term focus. One example is the DOE’s nuclear partnerships with Poland and Romania. In April 2024, DOE established the first-ever regional Clean Energy Training Center in Warsaw, Poland, aiming to catalyze the development of the nation’s civil nuclear energy program. The DOE can play an important role in building up the technical expertise of an allied country looking to build new technologies, like nuclear energy. By proactively engaging, the DOE can enable U.S. companies to better compete in the international market.
In the short-term, DOE could prioritize earlier and improved vetting of funding applicants and align compliance between the national labs through common IP licensing templates. These changes could make it easier for industry to work with both DOE programs and the National Labs. These actions could be part of a larger strategy to develop clear IP licensing procedures for universities and companies. This would be an important step to promote compliance and adequately protect any licensed IP. Beyond these themes, DOE could focus on increased transparency and reduce its reliance on waivers. DOE could promulgate explicit and discernible terms and conditions that are clear to funding applicants.
Longer-term, DOE could investigate providing access to a preliminary “background check” for partners to use to protect DOE-funded IP. DOE’s funding opportunities often require multiple partners and entities in a team that is applying to a solicitation. Choosing teaming partners is important from a security as well as technical perspective. Awardees receive equity investment inquiries and have outright sales opportunities for business units that have DOE-funded technology or for the IP itself. If DOE’s partners could vet potential partners by querying a database without having access to the data within it, that could provide some assurance of protection and may even help to capture more investment for DOE-funded technology.
Employing these solutions will strengthen DOE’s protection of American IP while improving access and encouraging energy innovators to partner with DOE. Employing the short-term solutions will provide the added bonus of making DOE’s processes, including award negotiating and contracting, faster, more efficient and more productive — a need we will lay out in our next blog in this series.
