United States: How Will ITC Confirmation That It Has Jurisdiction Over Digital Imports Impact Software And Media Industries?

Last Updated: April 5 2014
Article by Aarti Shah

The International Trade Commission (ITC) issued its much-awaited decision in Certain Digital Models today, affirming in a decision with important implications for the software and media industries that digital importation is within the jurisdiction of the Commission.  Though some commentators have characterized this decision as an expansion of the ITC's powers, the decision actually affirms powers the ITC has always had and previously exercised. However, the decision is important because it highlights the Commission's jurisdiction over such imports, is an example of how the Commission adapts its remedies to account for the realities of trade today, and because it may indicate that that the recent trend towards limiting ITC jurisdiction is halting.

The investigation, Certain Digital Models, Digital Data, and Treatment Plans for Use in Making Incremental Dental Positioning Adjustment Appliances, the Appliances Made Therefrom, and Methods of Making Same ("Certain Digital Models"), Investigation No. 337-TA-833, was instituted on April 5, 2012.  The seven asserted patents relate to a system for repositioning teeth using a series of successively placed appliances that is an alternative to conventional braces.

The Complainant, Align Technology, Inc., claimed that Respondents ClearCorrect Pakistan and ClearCorrect Operating, LLC, infringed their patents by sending digital data sets from ClearCorrect Pakistan to ClearCorrect Operating, LLC, and then using the data to make the physical models that were then used to fabricate the dental aligners that were sold to U.S. providers.

ClearCorrect did not dispute that it imported the digital data, but argued, among other things, that digital data is not an "article" under 19. U.S.C. 1337.

The Office of Unfair Import Investigations ("the Staff") supported a finding that electronic transmissions are "articles" within the meaning of Section 337, arguing that the plain language and legislative history of Section 337 provide a basis for interpreting "articles" to cover electronic transmissions, and that Commission precedent supported a finding that the Commission's authority extends to data electronically transmitted to recipients in the United States.

On May 6, 2013, ALJ Robert  K. Rogers, Jr. issued his 800 page Initial Determination finding that Respondents had violated Section 337, and infringed the patents of Align, by the importation of the data sets. The ALJ noted that in Certain Hardware Logic Emulation Systems and Components Thereof ("Hardware Logic"), Inv. No. 337-TA-383, the Commission held that "[t]he scope of section 337 is broad enough to prevent every type and form of unfair practice, including the transmission of infringing software by electronic means, electronic transmission of software and/or data that induces an infringing use of an imported product. . .". ID at 7.

Both parties petitioned for review. The Motion Picture Association of America ("MPAA") and Google were among the parties who responded to the Commission's request for written submissions by filing statements regarding the case—the MPAA supporting a finding of violation (and jurisdiction) and Google opposing.  The MPAA submission pointed out that in today's marketplace a significant amount of infringement occurs through electronic transmissions entering the United States over the internet, and that a finding of no jurisdiction would frustrate Congressional intent to provide domestic industries with a flexible and effective remedy from cross-border infringement through the ITC. Indeed, the MPAA stated that

On April 3, 2014, the Commission affirmed the Initial Determination in part, modified in part, and reversed in part. Importantly, the Commission affirmed the ALJ's conclusion that the accused product were articles within the meaning of Section 337 and that the mode of bringing the accused products into the United States—digital importation—constitutes importation under Section 337.  The Commission issued cease and desist orders directed to the Respondents, with an exemption for existing patients in the United States.  Should ClearConnect Pakistan or ClearConnect Operations LLC violate these cease and desist orders by continuing to digitally import, they could be liable for fees of up to $100,000 per day.

The full Commission opinion is still confidential and we will update this post when the opinion is made public. In addition, Respondents have 60 days to appeal the decision to the U.S. Court of Appeals for the Federal Circuit.

As a significant portion of software and entertainment articles such as movies are digitally imported into the United States, the case has significant implications for those industries.

Had the ITC decided the case in the opposite way, construing the term "articles" under Section 337 narrowly, this decision would have deprived many United States companies from obtaining relief from the ITC, which is one of the most powerful venues for counteracting infringement. Further, it would have been a significant blow to the ITC's jurisdiction.  The ITC's decision today in Certain Digital Models reaffirms that the Commission has the authority not only to issue relief against the digital importation of infringing products, but also to exercise its jurisdiction broadly, to fashion a remedy that adapts to the realities of today's marketplace to help companies with a domestic industry to protect their intellectual property.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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Aarti Shah
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