Digital data is not considered “article” within the meaning of Section 337

Kumiko Ide | November 11, 2015

Clearcorrect Operating, LLC, et al. v. ITC, et al.

November 10, 2015

Judges: Prost, Newman, O’Malley
Majority opinion by Prost
Concurring opinion by O’Malley
Dissenting opinion by Newman

Summary

The Congress enacted 19 U.S.C. §1337 (“Section 337”) to regulate international commerce, intending it to be an enforcement statute to stop at the border the entry of goods, i.e., articles, that are involved in unfair trade practices. In this case, the purported “article” found to have been imported was digital data that was transferred electronically. The CAFC’s majority opinion concluded that digital data is not considered “article” covered by Section 337, and therefore, ITC does not have jurisdiction over the case.

19 U.S.C. §1337(337条)は、侵害製品等、不公正な貿易に関わる製品を国境において差し止めることを目的とする、通商を規制する法律である。本件において、ITCは、電子的に米国内に輸入されたデジタルデータは特許を侵害しているため、337条違反が行われたと認定した。しかし、CAFCは、電子データは、337条の「製品(article)」の定義には当てはまらないとして、国境を越えて輸入された電子データは、ITCの管轄下ではないと結論付けた。

Details

Majority opinion (Prost)
Align Technology, Inc. filed a complaint, alleging that the respondents, ClearCorrect Operating, LLC (“ClearCorrect US”) and Clear Correct Pakistan, Ltd. (“Clear Correct Pakistan”) infringed various claims of its seven patents, and was in violation of Section 337. The technology at issue relates to manufacturing of orthodontic appliances known as aligners.

ClearCorrect US creates a digital recreation of a patient’s initial tooth arrangement, which is electronically transmitted to ClearCorrect Pakistan. Based on this data, ClearCorrect Pakistan creates final tooth position as well as digital data models of intermediate tooth positions for each incremental aligner. The data is then transmitted to ClearCorrect US, which 3D prints the digital models into physical models. Here, the accused “articles” is identified as the transmission of the “digital models, digital data sets, which are virtual three-dimensional models of the desired positions of the patient’s teeth at various stages of orthodontic treatment” from Pakistan to the United States.

The patent claims at issue in this present appeal concerns (1) claims relating to methods of forming dental appliances; and (2) claims that relate to methods of producing digital data sets.

The Administrative Law Judge (“ALJ”) found in its Initial Determination that respondents infringed the claims at issue, and determined that the ITC had authority to order respondents to stop electronically importing digital models into the United States. The ALJ recommended the ITC to issue a cease and desist order to the respondents to prohibit the importation of digital models.

On April 3, 2014, the ITC found the patent claims infringed, where ClearCorrect US directly infringed the patents, and ClearCorrect Pakistan contributed to that infringement. Because ClearCorrect US’s infringement occurred in the United States, it was not a violation of Section 337, but the ITC exerted its authority over ClearCorrect Pakistan as a contributory infringer for importing the electronic data models. The ITC also agreed with the ALJ’s finding that it had jurisdictional authority over electronically imported data under Section 337. The case was appealed before the CAFC.

The Congress enacted Section 337 intending it to be an enforcement statute to stop at the border the entry of goods, i.e., articles, that are involved in unfair trade practices. In this case, the purported “article” found to have been imported was digital data that was transferred electronically. The question before the CAFC was whether the electronic data is considered an “article” under Section 337.

In reviewing the ITC’s construction of Section 337, the CAFC’s majority opinion applied the Chevron test, which asks (1) whether Congress has directly spoken to the precise question at issue; and (2) if not, whether the agency’s interpretation is based on a permissible construction of the statue.

Here, while the term “articles” is not defined in the Act, the majority found that the literal text, in view of its context and statutory scheme, is clear that “articles” is defined as “material things,” and does not extend to electronic transmission of digital data.

While the majority opinion found the Congress’s expressed intent to be unambiguous, and therefore, it need not address step two of the Chevron test, it stated that even if step two were addressed, the ITC’s interpretation of the term “articles” was unreasonable. The majority opinion discussed that while the ITC analyzed various dictionary definitions, it failed to adopt a definition consistent with any of the definitions it references. In addition, the CAFC’s majority opinion pointed to the ITC’s failure to properly analyze the legislative history regarding the Tariff Act. Thirdly, the CAFC discussed how the ITC wrongly focused on current debates in Congress with regards to what “article” means.

The CAFC majority therefore reversed and remanded, concluding that the ITC does not have jurisdiction over the case.

Concurring opinion (O’Malley)
The concurring opinion agreed with the majority’s conclusion that the ITC lacks jurisdiction over the case, but disagreed that the Chevron framework needed to be applied in analyzing this case. O’Malley believed that there is no ambiguity in the statute, and it is clear that Congress could not have intended to grant the agency authority to act in this case.

Dissenting opinion (Newman)
The dissenting opinion focused on the purpose of Section 337, which is to facilitate the protection of American industry against unfair competition by infringing imports. The dissent disagreed with the majority, stating that the legislative intent could not have been to stop the statute with the forms of “article” known at the time of enactment.

Takeaway
The ITC does not have jurisdiction over importation of electronic data from foreign country into the United States.

Full Opinion

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