What started as a case between two makers of plastic braces at the United States International Trade Commission (ITC) has led to great interest from the entertainment industry and technology companies. Align Technology, Inc. makes the popular Invisalign® plastic braces and filed a complaint against their competitor ClearCorrect Operating, LLC at the ITC for infringing several of their patents on orthodontic aligners. The ITC is empowered by 19 U.S.C. § 1337 (Section 337) to block various unfair practices in import trade. Those unfair acts include the importation, sale for importation, or sale within the US after importation of articles that infringe a valid and enforceable US trademark, copyright, or patent. Where unfair acts are found, the ITC can issue exclusion orders to Customs and Border Protection to block importation of those infringing articles. ClearCorrect was accused of violating Section 337 of the Tariff Act of 1930 by importing digital models of dental molds by sending electronic files of their patients’ teeth measurements to their affiliate in Pakistan. Next, data sets were generated for the 3D digital models of the molds and then they were transmitted back to the US electronically to be 3D printed. The ITC’s final determination ruled that the agency has jurisdiction over the data sets transmitted over the Internet since they qualified as “articles” under 19 U.S.C. § 1337(a)(1)(B). The ITC issued cease and desist orders that directed ClearCorrect to stop its digital importation of infringing files. Both parties appealed the ITC’s ruling, which for the first time extended the ITC’s jurisdiction beyond physical items of commerce to electronic data transmissions.

Amicus briefs were filed at the Federal Circuit on behalf of “the Motion Picture Association of America, the Recording Industry Association of America, and the Association of American Publishers in support of the Commission’s decision; and on behalf of Public Knowledge, the Electronic Frontier Foundation, the Business Software Alliance, the Internet Association, Nokia Corporation, and Nokia USA Inc. in opposition to the Commission’s decision.” While technology companies were against the decision, the entertainment industry welcomed the decision as it affected Internet transmissions and presented a new weapon against piracy. This war on piracy has been a slow process because piracy mainly happens though streaming and Internet downloads and targeting offshore sites has been difficult. Once a website is taken down, others appear to take its place. While the Stop Online Piracy Act (SOPA) died in Congress in 2012, the entertainment industry could now obtain site-blocking powers from the ITC. The proposed SOPA provided a provision that allowed the Department of Justice to obtain court orders that required Internet service providers to block customers from accessing foreign piracy websites. Now, if the ITC decision stands, Hollywood can go to the ITC to block the transmission of digital files that infringe US copyrights. In contrast, technology companies and proponents for an open Internet were against the decision because they believe the ITC should not be able to impeded Internet transmissions.

The appeal, ClearCorrect Operating, LLC v. ITC, No. 2014-1527 was decided on November 10, 2015 by a split panel at United States Court of Appeals for the Federal Circuit. Circuit Judge Prost wrote the opinion for the court, Circuit Judge O’Malley wrote a concurring opinion, and Circuit Judge Newman wrote a dissenting opinion. The court held that “articles” as used in Section 337 of the 1930 Tariff Act did not cover electrically transmitted digital data. The court found that there is no ambiguity in the meaning of “articles” and that Congress intended “articles” to mean “material things” because the statute allows for the seizure and forfeiture of “articles” and calls on the Secretary of the Treasury to notify ports of entry about articles subject to an exclusion order. Electronic data is neither subject to entry through a port, nor can it be seized at a port. In addition, the original remedy provided by Section 337, exclusion orders, could not prevent the importation of electronic transmissions since they do not go through US ports. Thus, the term “articles” only covered material things and the ITC’s interpretation of the term “articles” was entitled no deference under Chevron because the statutory interpretation was unreasonable. The opinion noted that “[w]e recognize, of course, that electronic transmissions have some physical properties — for example an electron’s invariant mass is a known quantity — but common sense dictates that there is a fundamental difference between electronic transmissions and ‘material things’.” The opinion later went through multiple dictionary entries from the time period of the act to show that the definition of “articles” did not include electronic transmissions. This decision prevents the ITC from blocking data transmissions where a US party and a foreign party cooperate to avoid importing a material thing.

Circuit Judge O’Malley agreed with the majority opinion, but would not have applied the Chevron test because this is a case where Congress clearly “did not intend to delegate regulation of the Internet to the Commission.”

Finally, the dissent by Circuit Judge Newman agreed with the ITC’s interpretation and focused on how the ITC must have the power to expand its jurisdiction to stop the latest technologies used for infringement. She noted that Section 337 does not differentiate between the importation of physical media containing digital data and the transmission of digital data electronically.

As a result of this decision, the Internet has one less regulator, but that may change if the decision is appealed and heard en banc by the Federal Circuit or taken by the Supreme Court. The entertainment industry may have one more shot at acquiring the power to block Internet downloads at the ITC if this decision is reversed.

 

 

Inzer Ni is a J.D. candidate, 2017, at NYU School of Law.