ClearCorrect Operating, LLC v. International Trade Commission

ClearCorrect Operating, LLC v. International Trade Commission
819 F.3d 1334 (Fed. Cir. 2016) (per curiam)
Authored by Kristin Elia

Statement of Facts: Align Technology, Inc. (“Align”) held valid patents in certain dental products. In the Matter of Certain Digital Models, Digital Data, and Treatment Plans for Use in Making Incremental Dental Positioning Adjustment Appliances, the Appliances Made Therefrom, and Methods of Making the Same, Inv. No. 337-TA-833, 1–2. ClearCorrect Operating’s (“ClearCorrect”) Pakistani affiliate transmitted certain “digital models, digital data, and digital information,” similar to Align’s goods, into the United States through the Internet. ClearCorrect Operating, LLC v. Int’l Trade Comm’n, 819 F.3d 1334 (Fed. Cir. Mar. 31, 2016) (per curiam) (Newman, J., dissenting). Section 337 of the Tariff Act, 19 U.S.C. § 1337, authorizes the United States International Trade Commission (“ITC”) to exclude the importation of “articles” that infringe a United States patent, copyright, trademark, mask work, or design. ClearCorrect Operating, LLC v. Int’l Trade Comm’n, 810 F.3d 1283, 1286 (Fed. Cir. 2015).

Procedural History: On April 5, 2012, the ITC initiated an investigation of ClearCorrect and its affiliates based upon a complaint filed on behalf of Align. Inv. No. 337-TA-833, 1–2. The complaint alleged violations of Section 337 of the Tariff Act based upon patent infringement through ClearCorrect’s importation of the digital goods. The ITC found that ClearCorrect’s imported goods infringed upon Align’s valid patents. The ITC thus issued a Cease and Desist Order to ClearCorrect.

On November 10, 2015, ClearCorrect appealed to the Federal Circuit before Chief Judge Prost and Circuit Judges Newman and O’Malley. 810 F.3d 1283. The ITC, Appellee, argued here that “articles” should include the electronic transmission of digital data, or digital goods. The court held that this definition expanded the scope of the ITC’s jurisdiction and was contrary to clear congressional intent. As such, the court held that the ITC has no jurisdiction to exclude infringing digital goods that are imported electronically. Thus, the Federal Circuit reversed the ITC’s Cease and Desist Order. The ITC and Align, Intervenor, filed petitions for rehearing en banc.

Question Presented: Should the court grant petitions for rehearing en banc to determine whether the ITC has the authority to exclude digital goods as infringing imports under Section 337 of the Tariff Act?

Holding: In a per curiam decision, the Federal Circuit denied the petitions for rehearing en banc.

Reasoning: The ITC does not have jurisdiction to exclude infringing digital goods that are imported electronically into the United States because the term “articles” within Section 337 of the Tariff Act does not include digital goods. Because the ITC’s interpretation of this term does not align with clear congressional intent, the ITC’s interpretation is unreasonable and thus not entitled to judicial deference.

Concurring Opinion: Chief Judge Prost and Circuit Judge O’Malley, with whom Circuit Judge Wallach joined, concurred in the denial of the rehearing en banc. The concurrence is based upon disagreement with the dissent’s alleged misinterpretation of Section 337 of the Tariff Act. The concurring judges argued that the dissent viewed a myriad of statutes as illustrating congressional intent to account for the “advent of things like digital data and electronic transmissions.” 819 F.3d at 1336 (Prost, J., concurring). The concurrence argued, conversely, that those statutes are irrelevant to Section 337, the applicable statute in this case. The dissent’s reliance on these statutes is unfounded because those statutes would help prove the majority’s conclusion that if Congress hoped to bridge the gap between the non-digital and digital worlds, it would do so affirmatively. In addition, contrary to the dissent’s suggestion, Congress must change the law, not the courts.

The concurrence and dissent also disagreed over which factors determined whether something was an “article.” The concurrence argued that, in order for the ITC to exercise jurisdiction under Section 337, the imported good must be an “article” that might infringe a U.S. patent. The dissent claimed that Section 337 depended only on whether the imported good infringed a patent, copyright, trademark, or design. The concurrence also claimed that the dissent mischaracterized its own definitions of “article” and, regardless, the dissent’s definitions are not inconsistent with defining “article” as a “material thing.” As such, the dissent failed to provide support for its overly broad interpretation of the term “article.”  According to the concurrence, the correct interpretation of “articles” in Section 337, as determined by the majority, is “material things[.]” Id. This interpretation is “mandated by the plain meaning of the word, the context of 19 U.S.C. § 1337(a) and the entire statutory scheme, and the legislative history.” Id.

Dissenting Opinion: The dissent argued that the majority’s decision was inconsistent with precedent and congressional intent. In a previous Federal Circuit decision, Suprema, Inc. v. International Trade Commission, 796 F.3d 1338, 1350 (Fed. Cir. 2015) (en banc), the Federal Circuit held that there was congressional intent within Section 337 to vest broad enforcement authority to the ITC in remedying unfair trade acts. In the current case, however, the court has held that “article” within Section 337 does not include digital goods, even though “article” has been a general term including digital goods across judicial and agency rulings for goods in trade. The essence of the dissent’s argument is that “[d]igital goods are included in the tariff laws[.]” Id. at 1337 (Newman, J., dissenting). Just like physical goods, digital goods are imported, bought, and sold, and are subject to the same patent laws. The dissent’s opinion is based upon three arguments.

First, Section 337 does not differentiate between forms of goods, but instead focuses on whether the imported good infringes a patent, copyright, trademark, or design. The dissent believes the majority was in error because it is the first time the court has created a distinction between imports depending on the infringing goods’ carrier.

Second, the court’s holding conflicts with precedent. Several other courts’ precedential decisions have indicated that the Tariff Act was meant to provide broad protection to domestic industries from foreign goods.  The Supreme Court has urged that statutory law should be interpreted based upon technological changes to reflect the legislative purpose behind the statute. If technological change has rendered literal terms ambiguous, the statute must be interpreted according to its intended purpose. It is clear now that patent law covers digital goods and that digital goods may be imported, so there is no basis for finding that infringing digital goods are not covered by the Tariff Act if they are imported electronically.  Previous Federal Circuit and ITC cases illustrate a willingness to include digital goods as subject to the ITC’s jurisdiction. The dissent also argued that the court’s ruling conflicts with decisions of many other courts, agencies, and statutes, such as the Bureau of Customs and Border Protection, the Court of International Trade, the Department of Labor, the Arms Export Control Act, the Omnibus Trade and Competitiveness Act of 1988, and the Trade Priorities and Accountability Act of 2015. All of these entities and statutes have illustrated that digital products are “goods” or “articles” just as ordinary material goods are.

Third, the term “article” should not be limited to “classical technology,” based upon the above information. The dissent cited many authorities with several definitions of “article” to show that the term is generally intended to be broad. Such authorities include the Customs Court, now the Court of International Trade, the Court of Customs and Patent Appeals, Webster’s New International Dictionary, the Supreme Court, and the Dictionary of Tariff Information. In this case, the dissent argued that the ITC’s definition of “articles” as encompassing all “articles of commerce” was correct. Although digital goods did not exist at the inception of Section 337, there is no indication that Congress intended the section to exclude later-discovered technologies. Moreover, there is a general assumption that statutes are not meant to be confined to their particular time. The dissent further argued that the court wrongly based its definition of “articles” on selections from chosen dictionaries. The dissent analyzes thirty definitions of “article” from 1900-1930 and found that the “unifying theme of all the definitions is that ‘article’ refers to one of a class of things, and that the nature of the class is defined by context, not by the word ‘article.’” Id. at 1344. None of the modifying terms within Section 337 would merit eliminating digital goods from the statute. The dissent also argued that including in Section 337 authorization for cease-and-desist orders in 1975 does not suggest that digital goods should be excluded. Furthermore, the carrier of the import, or the form it is in, should not affect the meaning of Section 337 because the section does not differentiate between carriers. Lastly, if there remains any doubt within the Federal Circuit about the proper interpretation of Section 337, the court should have deferred to the ITC’s reasonable interpretation, as it has done in similar situations in the past.

For the above reasons, the dissent found that a rehearing en banc was appropriate.

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