Federal Circuit Holds that the ITC Lacks Jurisdiction Over Electronic Transmission of Digital Data

Federal Circuit Holds that the ITC Lacks Jurisdiction Over Electronic Transmission of Digital Data

On November 10, 2015, the Federal Circuit held that the United States International Trade Commission ("ITC") lacks authority over the importation of electronically transmitted digital data. See ClearCorrect Operating, LLC v. ITC, 2014-1527 (Fed. Cir. Nov. 10, 2015). While this decision arose in the context of patents related to orthodontic alignment technology, the Federal Circuit's narrow interpretation of the ITC's jurisdiction has serious implications for the ITC's ability to enforce both software patents and copyrights.

Section 337, 19 U.S.C. § 1337(a), describes the ITC's authority as covering importation or sale of "articles." At issue in the case was whether the meaning of "articles," first codified in the Tariff Act of 1922, is broad enough to cover the more recent phenomenon of electronically transmitted digital data. The ITC held that it did, but the Federal Circuit, in a split decision, disagreed. The majority relied on the following in reaching its decision: (i) dictionaries from the 1920s and 1930s, many of which define "articles" as "material things"; (ii) the use of the word "articles" in other sections of the Act, which assume that "articles" are physical things and which, as originally enacted, would not have been able to provide a proper remedy for transmission of intangible electronic data; (iii) the Harmonized Tariff Schedule of 1930, which also listed only material objects; and (iv) the Federal Circuit's earlier opinion in Bayer AG v. Housey Pharm., Inc., 340 F.3d 1367 (Fed. Cir. 2003). Judge Newman dissented, arguing that the statute should be allowed to evolve with evolving technology.

Ramifications of the Decision

The Federal Circuit's holding limits the ITC's ability to enforce any IP rights in electronically transmitted digital data—whether in the patent or copyright context. Its potential impact is reflected in the numerous amicus briefs filed in the case. Some parties argued that limiting the ITC's jurisdiction to material things, as the Federal Circuit ultimately did, "could effectively read copyright protection out of Section 337 because electronic transmission is the mode by which most unauthorized copyrighted works are imported into the United States" (Motion Pictures Association of America and the Recording Industry Association amicus Br. at 4), and would "create a gap so wide in the Commission's authority as to render Section 337 essentially meaningless for wide swaths of patents covering some of the most commonly used consumer goods" (Nokia amicus Br. at 15). Others argued that allowing the ITC to regulate electronically transmitted digital data "risk[ed] widespread disruption of the global Internet and [of] essential American economic interests" (Internet Ass'n (representing numerous companies that do business over the internet) amicus Br. at 7), and could impede "an open and unfettered arena of technological growth" across an open internet (Public Knowledge & EFF amicus Br. at 17).

Given the importance of the issue, and the conflicting views of numerous serious amici, it is possible that ClearCorrect will be further reviewed by either the Federal Circuit en banc or by the United States Supreme Court.

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