United States: Federal Circuit Reverses ITC, Holds That Electronic Transmissions Of Digital Data Are Not "Articles" Subject To ITC Jurisdiction Under Section 337

Electronic transmissions of digital data from foreign entities are not "articles" under Section 337 (19 U.S.C. § 1337) or subject to ITC jurisdiction, held a split panel of the US Court of Appeals for the Federal Circuit. The Federal Circuit reversed the ITC's ruling that such transmissions could be excluded under their jurisdiction. The Court's decision was watched closely by many in the tech and media industries, which believe the ITC's broader interpretation of Section 337 may have led to government regulation of Internet transmissions.

The case was brought by Align Technology, to stop the importation of digital files that were used to create patent-infringing versions of Invisalign clear braces. The digital files were imported or transmitted from ClearCorrect Pakistan into the United States by ClearCorrect Operating, LLC, the parent company. The "articles" in question were 3D data models of patients' tooth positions used to fabricate orthodontic aligners in accordance with patent methods. The data models were generated in Pakistan based on digital data received from the United States, and then transmitted back to the US, where they were converted into physical aligners. The Commission concluded that ClearCorrect Pakistan and ClearCorrect US were violating Section 337 by practicing certain method claims in Pakistan and then electronically "importing" those digital models into the United States over the Internet to form the physical aligners. ClearCorrect Pakistan was also found to be indirectly infringing by contributing to ClearCorrect US's direct infringement of certain patent claims in the United States.

The central issue on appeal was whether Section 337 gives the Commission jurisdiction over "importation" of electronic transmissions of digital data. The Federal Circuit panel held 2-1 that the Commission does not have jurisdiction because the term "articles" in Section 337 is limited to "material things" and does not include intangibles. The majority's opinion rested primarily on the literal text and legislative history of Section 337, dictionary definitions of "articles" and other statutory uses of the same term. While "electronic transmissions have some physical properties," the majority wrote, "common sense dictates that there is a fundamental difference between electronic transmissions and 'material things.'" The majority also found it difficult to see how the ITC or Customs could physically "exclude" electronic transmissions from "importation," or how digital data could be "forfeited" or "seized" pursuant to relevant provisions of Section 337. Given that electronic transmissions are not "articles," there can be no unlawful "importation" of infringing articles, and thus no basis for the ITC to exercise jurisdiction.

In so holding, the majority found that the interpretation of "articles that infringe" in Suprema v. ITC, Appeal No. 2012-1170 (Sept. 14, 2015), was not controlling. The sole issue in Suprema was whether a respondent could violate Section 337 by inducing direct infringement of a patent in the United States, when the act of direct infringement did not occur until after the article had been imported into the United States. In ClearCorrect, however, the court was looking exclusively at the interpretation of "articles" and not infringement.

Judge O'Malley, in a concurring opinion, argued that the ITC's broad interpretation of Section 337 would give it jurisdiction over all incoming Internet data transmissions, even though the ITC has never claimed to regulate Internet transmissions in the past; Section 337 does not mention data transmissions; and there are many competing policy concerns that implicate any attempt to regulate Internet traffic. Judge Newman dissented, arguing that Section 337 was broadly drafted to cover all potentially infringing articles, and the only relevant inquiry is the proper scope of the ITC's cease and desist orders, not infringement. In light of three opinions from the three-judge panel, the full Court may elect to review the panel decision en banc.

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