Rehearing Denial Leaves ITC’s Jurisdiction Tethered to the Material World

Last week, the en banc Federal Circuit declined to rehear its November 10, 2015, decision in ClearCorrect v. ITC, 2014-1527, leaving the U.S. International Trade Commission’s (ITC) Section 337 jurisdiction to “material things” that infringe U.S. intellectual property rights. This denial and the 2015 Federal Circuit decision have wide implications for a variety of industry sectors, especially those involved with the Internet of Things or any company that may transfer digital assets across the U.S. border. Regarding the case, this denial restricts the ITC from prohibiting ClearCorrect’s importation of digital files used to manufacture teeth aligners that allegedly infringed complainant Align Technology’s patents. (For more details on the November 10, 2015 decision, see our post, “Living in a Nonmaterial World: Determining IP Rights for Digital Data.”)

International-Trade-Commission-logo[1]In denying the rehearing, Judges Prost and O’Malley noted that, for the ITC to exercise jurisdiction over something, the thing must both be an “article” and must infringe U.S. intellectual property rights. They emphasized that Congress’ failure to “bridge the gap between the non-digital world and the digital world” supports the majority panel’s conclusion that Congress intended for the ITC’s authority to regulate importation of “articles that infringe” to be limited to regulating importation of “material things” that infringe. They also noted that other wholly separate legislative enactments, which the dissent cited to illustrate Congress’ intent to account for the advent of things like digital data and electronic transmissions, have no bearing on the Congressional intent regarding Section 337. Even if relevant, however, Judges Prost and O’Malley opined that those other statutes show that, when Congress wanted to bridge the gap, it did so affirmatively (which it did not do for Section 337).

Judge Newman, dissenting from the rehearing denial, argued that “[t]he carrier by which the infringing imports arrive in the United States is irrelevant,” and that the Federal Circuit’s decision, limiting the ITC’s jurisdiction to “material things” that infringe, defies the Supreme Court and Federal Circuit precedent. Judge Newman stated that the legislative purpose of Section 337 was “to aid in protecting domestic industry against unfair competition from goods imported into the United States … to prevent every type and form of unfair practice,” and that the Supreme Court and Federal Circuit have counseled “that statutory law should be adapted to its legislative purpose, in the context of advances in technology.”

Judge Newman also pointed to a list of definitions of “article” to support interpreting “article” as broader than “a material thing,” to which Judge Prost and O’Malley argued that “none of the dissent’s definitions are inconsistent with defining ‘article’ as a ‘material thing’” and that, “even with all the definitions brought in at this late stage, the dissent fails to support its overbroad interpretation.”

Whether the ITC or Align Technology will file a certiorari petition with the Supreme Court to overturn the Federal Circuit decision, or whether the ITC or others can persuade Congress to change the ITC’s authority by simply amending Section 337 to define “article,” remains to be seen. Regardless, the case exhibits the challenges faced by courts and agencies tasked with regulating ever-evolving technology that increasingly emphasizes the digital rather than the physical.