Are electronic transmissions “articles”within 19 U.S.C. § 1337?November 16, 2015

The United States International Trade Commission (USITC) is authorized by federal law (39 U.S.C. § 1337) to take action against the “importation … of articles that (i) infringe a valid and enforceable U.S. patent.”USITC investigations represent an alternative to federal court intellectual property litigation, and may be especially useful where the allegedly infringing act involves importation into the U.S.

The USITC generally takes action in intellectual property-based cases through an investigation, referred to as a “‚¬Ëœ337 investigation.”A patent owner (or a trademark owner) can file a complaint with the USITC, alleging, under oath, a violation of Section 337.The USITC then determines whether the complaint satisfies the requirements of its rules, and whether a ‚¬Ëœ337 investigation should be instituted. Following institution, the USITC conducts an investigation to determine whether the statute has been violated.The primary remedies available through such investigations include (1) exclusion orders that direct Customs to stop infringing imports from entering the United States; (2) issuance of cease and desist orders against named importers and other persons engaged in unfair acts; and (3) expedited relief in the form of temporary exclusion orders and temporary cease and desist orders, in certain exceptional circumstances. The USITC’s jurisdiction, however, is limited by the same statute to “infringe[ment]” and “articles.”Recent decisions by the United States Court of Appeals for the Federal Circuit have confirmed that these are very real limits on the power of the USITC.

In one recent decision, Suprema, Inc. v. International Trade commission, the court was asked to determine the meaning of the term “infringe”within the context of § 337. Inthat case, the court held that the USITC has the power to exclude imported goods based on the theory that the goods will be used by another to infringe a U.S. Patent, even though the imported goods themselves do not infringe at the time of importation. In the more recent case, ClearCorrect v. ITC and Align Tech, the court has undertaken the definition of “articles”within Section 337.

The patent in question related to 3D printing of teeth aligners, involving obtaining several digital data sets, representing an initial tooth arrangement, a final tooth arrangement, and various intermediate arrangements, and fabricating a series of aligners based on those digital data sets.The patent owner, Align Technology, Inc. (“Align‚¬) filed a complaint with the USITC, alleging that a competitor, ClearCorrect Operating, LLC (“ClearCorrect US‚¬) and Clear Correct Pakistan (Private), Ltd. (“ClearCorrect Pakistan‚¬) (collectively “ClearCorrect‚¬), was violating Section 1337 with respect to the patent. In particular, Align asserted that the transmission of digital models by ClearCorrect Pakistan to ClearCorrect US constituted an importation of an article sufficient to satisfy Section 337. The USITC agreed, and issued an Initial Determination that it had jurisdiction by virtue of importation ofan infringing article, in the form of the digital models, and could issue a cease and desist order directed to ClearCorrect to prohibit the importation of the digital models.  Following its ‘337 investigation, the USITC found that ClearCorrect US directly infringed Align’s patents and ClearCorrect Pakistan contributed to that infringement, and exerted its authority over ClearCorrect Pakistan as a contributory infringer for importing the data models, basing its decision on the conclusion that it had jurisdictional authority over electronically imported data under Section 337. The USITC decision was appealed to the Federal Circuit.

In deciding the ClearCorrect case, the Federal Circuit reviewed Section 337 under the two-part test outlined in Chevron, U.S.A., Inc. v. Natural Res. Def. Council, Inc.. In part one, the court must determine if the statute has spoken on the subject matter, and if so, give the statute the effect based on the plain meaning. In the opinion of the Federal Circuit, an “article”is a physical or material thing. Therefore, the court determined that there could be no infringement of Section  337 by virtue of transmission of the digital models, based on the plain meaning of the statute, because there is no physical or material thing entering the US, i.e. there is no importation of articles. The second part of the Chevron test asks whether the agency’s answer to the question at issue is based on a permissible construction of the statute. In general, the statute shall govern so long as an ambiguity is not contrary or unreasonable relative to the non-ambiguous language. In the present opinion, the court held that part one of the test was satisfied, and therefore the issue could be resolved based on the plain meaning of “articles‚¬. Based on that, there was no need to analyze the case under part two. The court did suggest that had the analysis gone to part two, the result would remain the same: no infringement.

While the Court appeared to expand the powers of the US International Trade Commission (“USITC‚¬) in the prior Suprema decision, the ClearCorrect decision appears to take a step back. As suggested in the dissenting opinion, the purpose of Section 337 is to provide the USITC with a means to prevent importation of goods that are involved in unfair trade practices. While ClearCorrect US and ClearCorrect Pakistan may not be importing physical or material things, they appear to be collectively infringing one or more valid and enforceable patents, and to create an unfair trade practice. As technology continues to evolve, with a focus on more computer-implemented methods and systems, it may become harder to reconcile the USITC’s purpose of preventing importation of items that create unfair competition and may infringe valid and enforceable US patents, with the court’s decision to narrowly define “articles”as “material”or “tangible”items.

A full version of the ClearCorrect opinion can be found here.