Guest post by Sapna Kumar. Prof. Kumar is an Associate Professor at the University of Houston Law Center, where she teaches patents and administrative law. She has written extensively about the ITC. Her most recent article, Regulating Digital Trade, discusses the ClearCorrect decision at length and is available here (http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2586740).
Next week, the Federal Circuit will hear oral arguments for ClearCorrect Operating, LLC v. International Trade Commission. It will decide whether the International Trade Commission’s (ITC’s) jurisdiction extends to digital information. Much is at stake.
The ITC has jurisdiction over infringing “articles” that are imported into the country, under § 337 of the Tariff Act. Patent holders use the ITC because it can grant exclusion orders that block infringing goods from entering the country and are enforced by Customs and Border Patrol at ports of entry. The ITC can also issue cease-and-desist orders.
As discussed in an earlier post, the technology at issue involves plastic dental aligners. Align Technology’s (Align’s) patents cover methods of making aligners by generating the digital data sets for the aligners and then using the data to make the aligners, generally through 3D printing. ClearCorrect found what it thought was a clever way to circumvent the patent: patients were seen in Houston (where digital scans were made of the patients’ teeth), but a Pakistani counterpart created digital models of the patients’ teeth and created digital treatment plans. These data sets were uploaded to a Houston server; ClearCorrect then used 3D printers in Houston to create physical models of the patient’s teeth, and used the models to create the aligners.
Align argues that the digital data sets are “articles,” and claims that §337 was triggered when the data was uploaded to the Houston server. In April 2014, a majority of the ITC Commissioners agreed, interpreting the term “articles” to include digital information. Although the majority conceded that the ITC doesn’t have the power to exclude digital information from the U.S., it did order ClearCorrect to cease and desist importing data sets. Commissioner Johanson vigorously dissented, maintaining that Congress failed to delegate power to the ITC to remedy the importation of digital information.
Problems and Pitfalls
On the surface, the ITC’s decision seems like the right one—ClearCorrect was clearly trying to circumvent Align’s patents. But this case raises difficult questions regarding the scope of the agency’s authority. The core of the ITC’s jurisdiction is in rem, meaning that its jurisdiction isn’t over people, but rather, the articles themselves. In rem jurisdiction has been found to exist over intangible property such as domain names. In several domain name cases, courts emphasized the fact that in rem jurisdiction was appropriate because the court could exercise exclusive control over the property at issue. But nobody can control digital information in the abstract, making in rem jurisdiction a poor fit.
Even if in rem jurisdiction exists, there is still a question of what the term “articles” means. Here, the ITC’s statutory analysis is weak. It ignores Congress’s use of restrictive terms such as “goods” in the Tariff Act’s legislative history. More importantly, the ITC fails to address how Congress could have intended the ITC to have power over intangible articles in 1930 when the ITC lacked cease-and-desist authority until 1974.
But it gets worse. The ITC claims that the Supreme Court’s decision in International News Service v. Associated Press is relevant because it involved newspaper articles that were transmitted by telegraph, disregarding the fact that the case involved a different statute and an entirely different type of article. It also attempts to interpret “articles” in light of the Driver’s Privacy Protection Act, which was passed more than 60 years after the original Tariff Act. Going forward, the Federal Circuit should consider providing guidance to the ITC on how to engage in proper statutory interpretation.
This appeal is being closely watched. After the Sony Hack, a leaked memo emerged showing that the Motion Picture Association of America (MPAA) wants the ITC to order internet service providers to block customer access to websites with pirated content. To do this, the MPAA needs the ITC to have jurisdiction over infringing digital information. Given that there is no “digital border,” this also raises questions regarding when information has entered the country and links up to issues from Suprema, Inc. v. International Trade Commission regarding when § 337 is triggered.
Furthermore, this appeal will require the Federal Circuit to grapple with the issue of proper standard of review for ITC decisions. Because the ITC was interpreting the ambiguous term “articles” during formal adjudication, it is potentially eligible for strong deference under the Supreme Court’s Chevron U.S.A. v. Natural Resources Defense Council decision. Yet, the Federal Circuit has historically resisted applying Chevron deference to ITC patent decisions.
No matter how the Federal Circuit rules, its decision will not be the final word on digital trade regulation. One attempt has already been made to expand the ITC’s jurisdiction through legislation, and more attempts will likely follow.