ITC Powerless to Block Importation of Infringing Digital Files

The Federal Circuit held that the U.S. International Trade Commission (“ITC”) could not block the import of infringing digital files because the ITC lacked jurisdiction. According to the Federal Circuit, the term “articles” as described in 19 U.S.C. § 1337 of the Tariff Act is defined as “material things” and does not include the electronic transmission of digital data.

The ITC has the authority to block importation of infringing articles under § 1337, but the ITC has previously used that power to block physical goods only. In this dispute, however, the ITC expanded that jurisdiction and held that it had the authority to stop ClearCorrect from importing digital files that were used to create infringing versions of Invisalign clear braces.

Disagreeing with the ITC’s interpretation of the term article, the Federal Circuit applied the two steps of Chevron U.S.A., Inc. v. Natural Resources Defense Council, Inc., 467 U.S. 837 (1984). Under step one of the Chevron test, the Federal Circuit examined the term’s literal meaning in contemporaneous and modern dictionaries, the term’s context in § 1337 and its subsections, and the term’s role in the totality of the statutory scheme, including tariff schedules. The Federal Circuit held that all constructions of the term article point to Congress’s unambiguous intent that articles means tangible or “material things” and does not extend to ClearCorrect’s electronically transmitted digital models.

Because Congress’s intent was clear, the Federal Circuit acknowledged it did not need to address step two of the Chevron test. Nonetheless, the Federal Circuit held that the ITC “repeatedly and unreasonably erred in its analysis” when the ITC irrationally analyzed various dictionaries, misquoted the legislative history, and improperly cited current Congressional debates. Finally, the Federal Circuit noted its deference to Congress on this issue.

Concurring, Judge O’Malley agreed that the Commission lacked jurisdiction over the case, but disagreed with Judge Prost’s application of the Chevron test because of Congress’s clear intent. In dissent, Judge Newman agreed with the Commission’s interpretation of the Tariff Act and precedent concerning digital data and electronic transmissions. According to Judge Newman, “there is no basis for excluding imported infringing subject matter from Section 1337, whatever the form of the subject matter.”

In light of this decision, patent owners with software-related inventions may have to reevaluate whether they can bring a suit against an infringer at the ITC to take advantage of its speed and broad injunctive relief.

Read the full opinion for ClearCorrect Operating, LLC v. International Trade Commission >>