The Ministry of Defence's proposal for a new act on the protection of Norwegian defence technology and security-classified patents is intended to give Norway stronger control over technology of material importance to the Armed Forces' operational capability, but has been met with significant objections.
Among other things, the proposal introduces a markedly expanded scope of application, new decision-making and sharing mechanisms, and gives the Ministry of Defence a central role vis-à-vis both the defence industry and civilian technology companies. The need for an update is undisputed, but the consultation round shows that the proposal leaves several key questions unanswered, with consequences that may particularly affect smaller and civilian Norwegian actors.
Today's (outdated) regulatory framework
The current Act on Inventions of Importance to Defence entered into force in 1956 and is largely based on an outdated legal and industrial starting point. The Act covers only "inventions" that "concern war materiel" or are of "direct importance to the defence of the realm", and operates primarily within the patent system through the confidentiality of patent applications.
Today's technological and geopolitical reality is entirely different from when the Act was written. In the consultation paper, the Ministry of Defence describes today's situation as "the Fourth Industrial Revolution", in which components and expertise increasingly reside with civilian industry as well as the defence industry.
Administration of the current framework is fragmented. Formal authority is vested in the King (delegated to the Ministry of Defence), and is administered in practice by the Norwegian National Security Authority (NSM), the Norwegian Industrial Property Office (Patentstyret) and the Norwegian Defence Research Establishment (FFI), while the Norwegian Defence Materiel Agency (Forsvarsmateriell) has since 2016 held a de facto coordinating role based on the Strategy for the Protection of Norwegian-Developed Defence Technology (2018) – without an independent statutory basis. The protection of defence technology is also, in practice, embedded in the export control regulations and the Security Act, without the interaction between the regimes being clearly regulated.
An update is therefore long overdue.
The new legislative proposal
The bill, which was circulated for consultation in 2023, has a new, expanded scope of application in which the core concept is "defence technology worthy of protection" (beskyttelsesverdig forsvarsteknologi). Defence technology is defined as goods, services and technology that can be used for defence purposes, regardless of the level of development and regardless of whether the technology is already generally available, and also captures know-how, algorithms, software, production processes and expertise.
Following an overall assessment, the Ministry of Defence may decide that a specific technology is "worthy of protection" when it is of material importance to the Armed Forces' operational capability. Key factors include adaptation to Norwegian conditions, the consequences of loss, availability on the market, defence policy benefits, and the importance of shielding sensitive information.
The legal effects under the proposed framework are far-reaching. Once a technology is determined to be worthy of protection, the company must seek specific authorisation from the Ministry of Defence for any sharing – both domestically and for export – in addition to the ordinary export licence from the Ministry of Foreign Affairs. The Ministry of Defence may also order or prohibit use, development or production, and the King in Council may expropriate or secure the right to exploit the technology for a limited period.
The consultation round: Agreed on the need, disagreed on the solution
The need for a modernised regulatory framework enjoys broad support, but several key stakeholders have at the same time raised significant objections to how the bill is drafted. The objections relate in particular to four issues:
1. The scope of application is far-reaching and the threshold for application is unclear.
The definition of "defence technology" may in practice capture large parts of the technology industry, and it is unclear where the threshold for being worthy of protection lies. Without regulations and guidance in place at entry into force, the uncertainty is heightened – both for the undertakings that must comply with the Act and for the caseworkers who must apply it.
2. The case-handling and appeals model provides limited predictability.
Decision-making authority rests entirely with the Ministry of Defence, with the King in Council as the appellate body. In reality, the solution does not amount to a two-tier process in the traditional sense, since the preparatory handling of any appeal in such cases would be carried out by the Ministry of Defence itself. In addition, an automatic prohibition on sharing without authorisation takes effect from the moment the Ministry of Defence gives notice that a technology is under consideration as potentially "worthy of protection". A case-handling deadline of up to one year could result in prolonged commercial unpredictability while the assessment is pending. One proposal from the consultation round is that decision-making authority be placed with the Norwegian Defence Materiel Agency, so that the Ministry of Defence can function as a genuine appellate body.
3. The compensation scheme is imbalanced.
Whereas expropriation gives rise to a right to full compensation, restrictions on the right of disposal under the bill will, as a general rule, not provide grounds for compensation. For undertakings that have invested significant development costs in the technology (and where the business model depends on export) this constitutes a real economic risk that in practice is borne by the rights holder alone.
4. The interaction between the bill and adjacent regulatory frameworks raises several questions.
Certain interfaces with the Security Act and export control remain unresolved. A decision that a technology is worthy of protection will in practice trigger an obligation to subject the undertaking to the Security Act, with the extensive requirements for clearance, security and infrastructure that this entails. The relationship between a decision on protection-worthiness and classification under the Security Act is not sufficiently clarified in the draft. In addition, export of technology worthy of protection will require separate authorisations from both the Ministry of Defence and the Ministry of Foreign Affairs, without the coordination between the processes being further regulated. Parallel regimes could undermine the predictability and speed that have to date been a competitive advantage for the Norwegian defence industry.
Consequences for the defence industry: Different actors, different exposure
Norwegian defence technology is largely developed with an international market in mind, and export potential forms a core premise of financing and business plans. A regime that gives the Ministry of Defence authority to intervene in decisions on sharing, development and production could therefore directly affect business models. In particular, the automatic restriction on sharing that takes effect as soon as a technology is reported for assessment could in practice make it difficult to participate in international projects or obtain external financing for up to a year.
The consequences will not be distributed evenly among the actors. Established defence suppliers have financial buffers and existing infrastructure for handling security-classified information. These actors will be able to manage case-handling times, clearance requirements and restrictions on the right of disposal considerably better than small, equity-financed technology companies and civilian actors developing dual-use technology. For the latter group, a decision on protection-worthiness, or merely a twelve-month assessment period in the middle of a tender process, could have a decisive impact on financing opportunities and investment capacity.
The jurisdiction criterion in the bill reinforces this imbalance. The Act applies to technology that is developed in Norway, owned or exploited by an undertaking within Norwegian jurisdiction, or for which a patent has been applied for in Norway. Depending on internal group structure and where the underlying technology was developed, foreign groups will in many cases fall outside the scope of the Act, even though their Norwegian operations compete in the same market as purely Norwegian actors.
In sum, the current bill risks harming the very part of the Norwegian technology industry it is intended to support, while giving foreign-owned competitors in Norway an advantage. In its consultation response, the Norwegian Defence and Security Industries Association (Forsvars- og sikkerhetsindustriens forening, FSi) warns that "development and production will move abroad" if the regulations are applied too strictly – a form of regulatory adaptation that would serve neither the authorities nor the industry.
Updated bill expected in the near future
Five questions in particular will be decisive for how the Act affects the defence industry:
- where the threshold for protection-worthiness is set, and whether regulations and guidance are in place at entry into force;
- whether a genuine two-tier decision-making process is established;
- whether the compensation scheme is adjusted to reflect the economic consequences of restrictions on the right of disposal;
- how the interface between this Act, the Security Act and the export control regulations is coordinated in practice; and
- whether the jurisdiction criterion is clarified so that the Act does not create unintended competitive imbalance between Norwegian and foreign-owned actors.
The bill was circulated for consultation in 2023, and an updated draft is expected shortly. How it is framed will be decisive for how the four main issues above are handled in practice.
For the Norwegian defence industry and the civilian technology companies that are increasingly part of total defence (Totalforsvaret), this is a regulatory framework that should be developed in close dialogue between the authorities and the industry. Throughout the consultation round, the Norwegian Defence Materiel Agency has shown a solution-oriented approach to several of the challenges described above. The further discussion should focus on how the bill can become a regulatory framework that strengthens, rather than weakens, the Norwegian defence industry and the civilian technology communities that the Act is also meant to protect.
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