MaximP /
11 November 2015Americas

ITC cannot halt transmission of digital files, Federal Circuit rules

Electronic transmissions of data do not count as “articles” under the 1930 Tariff Act and the International Trade Commission (ITC) overstepped its mark in halting their transmission, the US Court of Appeals for the Federal Circuit has ruled.

Under section 337 of the Tariff Act, the ITC can prevent the distribution of articles that infringe a valid US patent.

The ITC ruled last year that the act covers the transmission of electronic data in the dispute between ClearCorrect Operating and Align Technology. The ITC subsequently issued an order to cease the importation of ClearCorrect’s products, but has stayed the decision pending ClearCorrect’s appeal.

At dispute was the digital recreation of a patient’s tooth arrangement by ClearCorrect’s partner, ClearCorrect Pakistan.

ClearCorrect Pakistan would send the digital files of a patient’s adjusted teeth and then send it to its US partner, which would then print the documents using a 3D printer.

In its complaint to the ITC, Align Technology claimed that the transmission of this data infringed seven of its patents which the ITC accepted.

ClearCorrect appealed against the ruling and in a 2-1 decision, issued yesterday, November 10, the federal circuit said that the ITC overstepped its mark in halting the transmission of electronic data files.

Chief Judge Sharon Prost, who wrote the majority opinion, said the ITC was not entitled to deference outlined in the Chevron USA v Natural Res. Def. Council ruling.

Under Chevron, a body such as the ITC is afforded deference if US law does not explicitly answer the issue in a dispute. Instead, the ITC can hand down a ruling that expresses the “unambiguous intent” of Congress.

The ITC ruled that the term “articles” under section 337 of the act covered digital files and it therefore held the right to stop the importation.

But Prost said this was incorrect. She said that articles mean “material things” and that “common sense dictates that there is a fundamental difference between electronic transmissions and material things”.

“The ITC repeatedly and unreasonably erred in its analysis of the term ‘article’. It is not simply a question of the ITC having the choice between two ‘right’ definitions, but instead it represents a systematic pattern of the ITC picking the wrong conclusion from the evidence.

“Here the ITC has not offered a reasonable explanation for its definition of articles and thus is owed no deference,” she added.

Prost faced opposition from Judge Pauline Newman, who said the majority’s ruling contradicts a number of decisions issued by the federal circuit and the US Supreme Court.

“The purpose of Section 337 to provide a facilitated remedy against infringing imports is beyond dispute. The panel majority’s removal of this remedy from a preeminent form of today’s technology is a dramatic withdrawal of existing rights, devoid of statutory support and of far-reaching impact.”

Furthermore, Newman noted the act was enacted before the existence of digital files, but agreed with the ITC that section 337 includes all “infringing imported articles of commerce”.

“Section 337 was written in broad terms, whereby no field of invention, past, present, or future, was excluded. It is not reasonable to impute the legislative intent to exclude new fields of technology, and inventions not yet made, from a statute whose purpose is to support invention,” she concluded.

The case will now head back to the ITC.

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