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US ITC: Federal Circuit rules on ITC jurisdiction in ClearCorrect

In a decision that significantly curtails the reach of the US International Trade Commission (ITC), the US Court of Appeals for the Federal Circuit held the ITC lacks jurisdiction over electronic transmissions of digital data (ClearCorrect Operating, LLC v Int'l Trade Comm'n, No 2014-1527 (Fed Cir November 10 2015)). In practice, this means the ITC may investigate the importation into the United States of allegedly infringing software or data files if importation occurs via physical media (for example, a CD-ROM or thumb drive), but not if it occurs in machine readable form by electronic means (for example via file transfer protocol).

The facts regarding importation are undisputed. ClearCorrect makes "aligners" that are configured to be placed successively on a person's teeth to reposition them much like braces do. The aligners are created by making a digital model of the patient's teeth in the United States, which is electronically transmitted to ClearCorrect Pakistan, which creates digital data models of intermediate tooth positions. ClearCorrect Pakistan electronically transmits these digital data models to ClearCorrect US, which uses them to create the physical aligners that reposition patients' teeth. Align Technology, Inc alleged that ClearCorrect violated Section 337 (19 USC § 1337) via the electronic transmission of infringing digital data models from Pakistan to the United States.

Section 337 makes it unlawful to import into the United States "articles" that infringe a valid and enforceable United States patent. The exclusive question on appeal was whether the word "articles" includes intangible electronically imported data. The ITC held it does and, thus, that the ITC had jurisdiction to exclude electronically imported data. The Federal Circuit, in an opinion written by Chief Judge Prost, reversed, holding "it is clear that 'articles' means 'material things'," and does not encompass data that exists only in electronic form. The Court found that Congress unambiguously intended this meaning, relying on dictionary definitions of the word "article", Congress's use of the term "articles" throughout Section 337, the term's place in the overall statutory scheme, and the legislative history of the Tariff Act. The Court concluded the ITC's contrary definition does not warrant deference.

Judge Newman wrote a dissent supporting the ITC's definition of "articles", primarily because Section 337 was designed to reach "every type and form" of unfair competition arising from importation. The third judge on the appellate panel, Judge O'Malley, wrote a concurring opinion agreeing with Judge Prost's ruling, but finding the ITC's decision so "extraordinary" that the Court did not have to consider whether to give the ITC any deference.

This case has drawn wide attention and amicus briefs from eight entities. The amici were generally split between entertainment entities who supported the ITC's decision as an opportunity to use the ITC to combat online piracy of digital copyrighted content and digital rights groups who feared that the ITC's "overzealous" decision might lead to improper attempts to regulate the internet. Given this wide interest and the 1-1-1 split decision from the Federal Circuit, the ITC may seek review en banc or by the Supreme Court.

Jordan L CoyleBas de Blank

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