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ITC Can’t Block Digital Imports Under IPR Infringement Authority, Court Says

Tuesday, November 17, 2015
Sandler, Travis & Rosenberg Trade Report

The International Trade Commission’s authority to restrict imports of articles for intellectual property infringement does not extend to digital products, the Court of Appeals for the Federal Circuit ruled in a recent split decision. The ITC had determined in connection with a patent infringement investigation of digital models and data used in making dental appliances that digital products are articles, and that electronic cross-border transmissions constitute importation, for purposes of Section 337 IPR infringement investigations.

The CAFC’s decision centered on the definition of “articles” in Section 337 of the 1930 Tariff Act, which itself does not specifically define that term. The ITC concluded that this term includes digital data because it was understood at the time the law was enacted to carry the meaning of an identifiable unit, item or thing, with examples indicating that such articles may be traded in commerce or used by consumers. However, the court declined to defer to the ITC’s interpretation because the Commission had “repeatedly and unreasonably erred in its analysis” through “a systematic pattern of … picking the wrong conclusion from the evidence.” Instead, the court said, both contemporary and modern dictionaries and “the unambiguously expressed intent of Congress” make clear that the ordinary meaning of “articles” is “material things.”

In a concurring opinion, one of the justices wrote that the CAFC need never have considered whether to defer to the ITC’s interpretation because Congress clearly never intended for the ITC “to regulate one of the most important aspects of modern-day life;” i.e., the Internet. Instead, this justice concluded, the ITC wrongly assumed jurisdiction over all incoming international Internet data transmissions “despite never having purported to regulate Internet transmissions in the past, despite no reference to data transmissions in the statute under which it acts, despite an absence of expertise in dealing with such transmissions, and despite the many competing policy concerns implicated in any attempt to regulate Internet transmissions.”

However, the dissenting justice argued that Section 337 was “designed to reach ‘every type and form’ of unfair competition arising from importation” and that “it is not reasonable to impute the legislative intent to exclude new fields of technology, and inventions not yet made, from a statute whose purpose is to support invention.” Moreover, this justice wrote, Section 337 “does not distinguish between digital goods imported electronically and digital goods imported as embedded in a physical medium” such as a disc or other storage media, as the majority does. The dissenting justice concluded that “the panel majority’s removal of [the law’s remedies against infringing imports] from a pre-eminent form of today’s technology is a dramatic withdrawal of existing rights, devoid of statutory support and of far-reaching impact” and has “locked the International Trade Commission into technological antiquity.”

Had the ITC’s position been upheld there would likely have been significant implications for industries involving digital data flows. Businesses that facilitate and rely on digital trade said the ITC’s determination represented an overreaching of the agency’s authority that threatened new restrictions on such transactions, while producers of movies, music and other media supported the ITC’s move as a powerful tool against piracy.

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