Robotic exoskeletons may augment human strength, endurance, and mobility. The latest CFIUS action has all the makings of a Terminator movie.

This month, the Committee on Foreign Investment in the United States (“CFIUS”) pushed back on a U.S. and Chinese joint venture (“JV”) in the biotech sector. The U.S. party to the JV, Ekso Bionics Holdings, Inc., is developing exoskeleton technology for medical and industrial uses. However, CFIUS required a termination of that JV with facilities in China and investments by Chinese partners.

Ekso’s commercial undertakings are manufacturing robotic exoskeletons are for use in the health industry for stroke and spinal cord injury rehabilitation, and for general construction, manufacturing, and industrial applications. So it was no wonder that initial reports of CFIUS intervention caused a stir and raised a question in the biotech sector:

In light of Ekso, does the biotech industry need to reconsider its innumerable China collaborations?

Well, probably not.

The potential military applications of the technology include a futuristic assault suit apparently often referred to as the “Iron Man” suit – a bit beyond the usual ambit of biotech to recover well-being and repair the human form. The notice from CFIUS cites national security concerns that could not be mitigated. We suspect those concerns likely emanated from the U.S. Department of Defense in light of Ekso potentially making super-badass (a defense industry term of art) robot suits – dare we say supersoldiers? It is worth noting is that CFIUS probed into Ekso’s legacy work for the U.S. government and specific technology transfers.

Moreover, the JV likely involved more than just a shared investment. CFIUS may assert jurisdiction over the formation of a Chinese JV company in China where the U.S. party to the JV puts into that JV sufficient U.S.-origin technology and other intangible assets to be considered a U.S. business (see 31 C.F.R. § 800.301(e)(15-17)).

U.S. technology, plus military applications, plus China will almost always equal a national security concern for CFIUS. So while CFIUS has said “Hasta la vista, baby”[1] to this Chinese investment in biotech, we suspect not all such investments will be subject to this terminator treatment.

What do we take away from the Ekso case? 

The lessons from the Ekso case are consistent with the U.S. government’s treatment of China as an adversary, and CFIUS’s long-standing sensitivity with respect to defense technology. If a U.S. company has a division, branch, department, or subsidiaries working with the U.S. Government on military applications of certain technology, even an unrelated JV in which that company participates may expect to face increased CFIUS scrutiny for Chinese investments. The Trump Administration’s policy toward China yields decision results that may seem extreme or at variance with past administrations, but they are consistent in light of the Administration’s adversarial posture with respect to China.

While we will continue to update our devoted public with the latest on CFIUS activity here, we will decline to close with any cheap terminator references, such as, “I’ll be back.”[2]

FOOTNOTES

[1] We are sorry. We had to. We will not do it again.

[2] Dang it. Sorry. Again.