United States: Split Federal Circuit Panel Curtails ITC's Ability To Regulate Electronic Transmission of Data

On November 10, 2015, a split panel of the Federal Circuit issued a decision in ClearCorrect Operating, LLC v. Int'l Trade Comm'n (No. 2014-1527), curtailing the jurisdiction of the U.S. International Trade Commission ("ITC") in investigations under Section 1337 of the Tariff Act of 1930, as amended, ("Section 337"). In an opinion authored by Chief Judge Prost, the court held that Section 337 does not vest the ITC with authority to investigate unfair acts or unfair methods of competition in situations involving only electronic transmissions of data, as opposed to those involving the importation of "material things." This ruling is likely to be well received by many companies who heavily rely on cross-border electronic transmissions in today's information-age economy; however, because a petition for en banc review is expected, caution is still warranted.  

In the underlying ITC investigation that was at issue on appeal, the ITC found that respondent ClearCorrect violated Section 337 through the electronic transmission of certain digital models of teeth sent from servers in Pakistan into the United States, where the digital models were subsequently used in the United States to create physical models of teeth and to form dental appliances. The ITC found that ClearCorrect's U.S. subsidiary infringed certain claims of complainant Align Technology's patents relating to methods of forming dental appliances, but that this activity was not a violation of Section 337 because it occurred only within the United States. The ITC also found that ClearCorrect's Pakistan subsidiary violated Section 337 because it contributed to the infringement of the patents relating to methods of forming dental appliances, as well as directly infringing patents covering methods of producing digital data sets. But because an exclusion order would be ineffective in prohibiting the electronic transmission of digital models, the Commission instead imposed a cease-and-desist order prohibiting ClearCorrect from certain activities relating to the importation of digital models. Recognizing the uncertain state of the law concerning the ITC's jurisdictional authority over electronically imported data, however, the ITC took the rare step of staying the enforcement of the cease-and-desist order until the issue was resolved on appeal.

The principal issue before the Federal Circuit on appeal was whether the term "articles" in the context of Section 337 must mean "material things," or whether—as the ITC concluded—"articles" could also include electronically transmitted data. Chief Judge Prost's majority opinion held that articles must in fact be material things, and reversed the ITC's finding of a violation of Section 337 and its imposition of a cease-and-desist order. Echoing the Federal Circuit's recent evaluation of the term "articles . . . that infringe" in Suprema v. Int'l Trade Comm'n, the majority opinion first applied the two-step framework of Chevron U.S.A. Inc. v.  Natural Resources Defense Council, Inc., 467 U.S. 837 (1984), to determine whether the ITC's interpretation of articles was owed deference. But contrary to its conclusion in Suprema that "articles . . . that infringe" was ambiguous, the court here concluded that the term "articles" is not ambiguous in the context of Section 337—because neither the statutes at the time of the Tariff Act's passing nor contemporary dictionaries defined "articles" as anything other than "material things." Therefore, the court held that Congress had unambiguously intended that the ITC's jurisdiction relates to only material things, and that the ITC's interpretation that electronic transmissions should also be included within the definition of articles was owed no deference. Judge Prost also in the alternative applied Chevron step two and determined that the ITC's interpretation was unreasonable.          

Judge O'Malley (who argued in dissent in Suprema for more jurisdictional restrictions on the ITC) concurred with the conclusion that the ITC lacked jurisdiction over the case, but authored a separate opinion expressing her view that applying the two-step Chevron test was unnecessary. Judge O'Malley opined that the Internet is "arguably the most important innovation in communications in a generation" and that there is no indication whatsoever that Congress has or would have delegated regulation of the Internet to the ITC, noting that (1) the last major amendment to Section 337 came one year before the advent of the World Wide Web and (2) none of the recent debates over Internet-related legislation have raised the issue that the ITC may already be regulating the Internet.  

Judge Newman, writing in dissent, vehemently disagreed with the conclusion that the ITC lacks jurisdiction over electronic transmissions of data. Judge Newman argued that the term article should mean "articles of commerce," including electronic data, and that, given its broad terms, the Tariff Act "did not lock Section 337 into the technology in existence in 1922 or 1930." Judge Newman also recounted the various ways in which other entities, such as the Bureau of Customs and Border Protection, the Court of International Trade, and the Department of Labor, viewed the cross-border transfers of data as the importation of articles, regardless of whether that data was transmitted electronically or in a tangible medium. Finally, Judge Newman argued that the mere difficulty in enforcing exclusionary remedies against electronic transmissions of data is not grounds for discarding the ITC's jurisdiction over those transmissions.  

The case is now reversed and remanded to the ITC for dismissal for lack of jurisdiction, although a petition for en banc review or certiorari is likely to be filed. The Federal Circuit's decision may also have an impact on pending patent reform discussions, as stakeholders may seek to overturn the decision through an amendment of Section 337.  

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.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
 
In association with
Related Video
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
 
Email Address
Company Name
Password
Confirm Password
Position
Mondaq Topics -- Select your Interests
 Accounting
 Anti-trust
 Commercial
 Compliance
 Consumer
 Criminal
 Employment
 Energy
 Environment
 Family
 Finance
 Government
 Healthcare
 Immigration
 Insolvency
 Insurance
 International
 IP
 Law Performance
 Law Practice
 Litigation
 Media & IT
 Privacy
 Real Estate
 Strategy
 Tax
 Technology
 Transport
 Wealth Mgt
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement

Mondaq.com (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of www.mondaq.com

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about Mondaq.com’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.

Disclaimer

Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.

Registration

Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to unsubscribe@mondaq.com with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.

Cookies

A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.

Links

This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.

Mail-A-Friend

If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.

Security

This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to webmaster@mondaq.com.

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to EditorialAdvisor@mondaq.com.

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at enquiries@mondaq.com.

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at problems@mondaq.com and we will use commercially reasonable efforts to determine and correct the problem promptly.