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By Tony Dutra
Nov. 10 — The International Trade Commission's authority to bar imports that infringe U.S. patents extends to tangible articles only, and the commission cannot address allegations of infringement via electronic transmissions of data into this country, the Federal Circuit held Nov. 10 in a 2-1 panel decision.
The court's ruling means that ClearCorrect Operating LLC can continue to build data models of orthodontic aligners in Pakistan, send the data particularized to a dental patient's needs to the firm's U.S. presence, and use 3D printing to make the aligner here, leaving patent holder Align Technology Inc. without recourse to stop “importing” of the data.
The case generated interest well beyond 3D printing—and beyond patenting.
The ITC can stop imports related to copyright infringement as well, leading the American Association of Publishers, the Motion Picture Association of America and the Recording Industry Association of America to insist that the court defer to the commission's view that it has jurisdiction over electronic transmissions.
On the other hand, the Business Software Alliance, the Internet Association and others argued that the efficient functioning of data communications requires cross-border transmissions without the restriction an ITC ban would impose.
The panel's three opinions covering 57 pages largely debate what the word “articles” means in Section 337 of the Tariff Act, 19 U.S.C. §1137, the basis for the ITC's authority. U.S. companies can use Section 337 to stop the importation of “articles” that infringe intellectual property, but the word is not otherwise defined.
The commission, in granting Align's request and issuing a cease-and-desist order against ClearCorrect, justified its action by interpreting one definition from the 1920s to indicate that its authority extended to “something that is traded in commerce.”
But the court was sharply critical in two of the opinions.
Writing the court's opinion, Chief Judge Sharon Prost said the commission “failed to properly analyze the plain meaning of ‘articles', failed to properly analyze the statute's legislative history, and improperly relied on Congressional debates.”
As far as the assumption that the court was obliged to give “Chevron” deference to the commission's own interpretation of the word unless there was no ambiguity, Prost determined that no such deference was due after looking at contrary definitions in five other contemporaneous dictionaries and statements in the legislative history.
Prost was even more critical of a quote from the ITC's opinion that left out a key phrase—without indicating the omission—that ran against its argument. She closed by criticizing the commission for “a systematic pattern of the Commission picking the wrong conclusion from the evidence.”
If anything, Judge Kathleen M. O'Malley's concurring opinion was more critical. She contended that the court didn't even have to consider deference to the ITC, “because it is clear Congress could not have intended to grant the agency authority to act in the substantive space at issue.”
Yet, she said, the ITC somehow came to the opposite conclusion “despite never having purported to regulate Internet transmissions in the past, despite no reference to data transmissions in the statute under which it acts, despite an absence of expertise in dealing with such transmissions, and despite the many competing policy concerns implicated in any attempt to regulate Internet transmissions.”
Judge Pauline Newman dissented. Digital transmissions did not exist in the 1920s, she said, and it is unreasonable to believe that the Tariff Act of 1930 meant to “lock Section 337 into the technology in existence” at the time.
Newman further agreed with the ITC on the anomaly of applying Section 337 to data carried on discs or other hard storage mechanisms but not “when carried in packets or waves by wired or wireless transmission.”
“[T]he panel majority has locked the International Trade Commission into technological antiquity,” she said. “The court ignores precedent and logic, and removes a vast body of technology from the protection of a statute designed for its protection.”
Michael D. Myers of McClanahan Myers Espey, LLP̧ Houston, represented ClearCorrect. Stephen Kinnaird of Paul Hastings, Washington, represented Align. Sidney A. Rosenzweig of the ITC's Office of the General Counsel argued for the commission.
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