ITC Cannot Regulate Importation of Digital Data: Federal Circuit | Practical Law

ITC Cannot Regulate Importation of Digital Data: Federal Circuit | Practical Law

In ClearCorrect Operating, LLC v. International Trade Commission, the US Court of Appeals for the Federal Circuit held that the International Trade Commission (ITC) does not have authority to regulate the electronic transmission of digital data because they are not “articles” under 19 U.S.C. Section 1337(a)(1)(B).

ITC Cannot Regulate Importation of Digital Data: Federal Circuit

Practical Law Legal Update w-000-7534 (Approx. 3 pages)

ITC Cannot Regulate Importation of Digital Data: Federal Circuit

by Practical Law Intellectual Property & Technology
Published on 11 Nov 2015 • USA (National/Federal)
In ClearCorrect Operating, LLC v. International Trade Commission, the US Court of Appeals for the Federal Circuit held that the International Trade Commission (ITC) does not have authority to regulate the electronic transmission of digital data because they are not “articles” under 19 U.S.C. Section 1337(a)(1)(B).
On November 10, 2015, in ClearCorrect Operating, LLC v. International Trade Commission, the US Court of Appeals for the Federal Circuit reversed the International Trade Commission (ITC) and held that the ITC does not have authority to regulate the electronic transmission of digital data because section 337 of the Tariff Act of 1930 only provides remedies for unfair acts that involve the importation of "articles", which does not include electronic transmission of digital data ( (Fed. Cir. Nov. 10, 2015)).
In 2012, Align Technology, Inc. filed a complaint with the ITC asserting that ClearCorrect Operating, LLC and ClearCorrect Pakistan (Private) Ltd. (collectively ClearCorrect) violated section 337 by, among other things, importing into the US certain digital models, digital data, and treatment plans for use in making incremental dental appliances that infringed Align's patents. The ITC ultimately ruled in favor of Align, determining that it had jurisdictional authority over electronically imported data under section 337. For more information on the underlying dispute, see Legal Update, ITC Rules That Digital Data Sets are Articles.
The Federal Circuit reviewed the ITC's determination under the test outlined in Chevron, U.S.A., Inc. v. Natural Resources Defense Council, Inc. and held that the ITC did not have the authority to regulate ClearCorrect’s importation of digital data because electronic transmissions of digital data are not “material things,” and therefore not “articles” under the statute (467 U.S. 837, 843 (1984)).
Under the first step of the Chevron test, the Federal Circuit reviewed the statute's plain text, which provides the ITC with authority to remedy unfair trade acts that involve the importation of articles into the US, such as articles that infringe a US patent (see 19 U.S.C. § 1337(a)(1)(B)). Since the term "articles" is not defined in the statute, the Federal Circuit construed that term in accordance with its ordinary and natural meaning. To do that, it considered:
  • Dictionaries contemporaneously available with the statute's enactment, more modern dictionaries, the ITC's predecessor's own 1924 dictionary, and legal dictionaries, which all limit the word “article” to "material things."
  • The Tariff Act's use of the word "article" in other sections, which reinforces the conclusion that "articles" means "material things" because otherwise many sections of the statute would be superfluous. Specifically, the Federal Circuit noted that electronic transmissions cannot be:
    • seized;
    • forfeited; or
    • subject to attempted entry through a port of entry.
  • The statute’s basic statutory scheme where originally the sole remedy was an exclusion order, which could only impact material things. The Federal Circuit noted that the subsequent authorization of cease-and-desist orders merely provided a lesser and softer remedy than exclusion orders and did not expand the ITC's jurisdiction.
  • Section 337's connection to the Harmonized Tariff Schedule of the United States and related catchall clauses which identified dutiable and non-dutiable goods that are all material things.
The Federal Circuit also reviewed the legislative history, even though the statutory context was clear, and determined that Congress' expressed intent was that "articles" means "material things" and did not extend to electronically transmitted digital data.
Although the Federal Circuit concluded that it was unnecessary to consider the second step of the Chevron test, it still determined that the ITC’s construction of the statute was unreasonable because, among other things, it failed to properly analyze:
  • The plain meaning of "articles".
  • The statute's legislative history.
Judge O’Malley concurred but argued that the Federal Circuit did not need to apply the Chevron test because it was clear that Congress did not intend to grant the ITC the authority to regulate internet transmissions.
Judge Newman dissented arguing that section 337 applies to all patented technologies, including digital technologies, regardless of how they are imported.