Tuesday, November 10, 2015

U.S. Tariff Act Section 337 Does Not Prevent Electronic Transmission of Data Into U.S.

Section 337 of the U.S. Tariff Act renders unlawful the importation of infringing "articles" into the United States, subject to certain conditions.  This morning in ClearCorrect Operating, LLC v. International Trade Commission, the Federal Circuit held that digital data are not "articles," and thus that section 337 does not confer jurisdiction on the U.S. International Trade Commission (ITC) to issue a cease and desist order directed against the electronic transmission of such data into the United States.  

The patents in suit claim methods for fabricating dental appliances based on digital data sets representing a patient's initial and repositioned tooth arrangements.  The ITC had previously held, first, that ClearCorrect US directly infringed one of the patented methods by its conduct in the U.S., but that such purely domestic conduct does not implicate section 337; and second, that ClearCorrect Pakistan practiced the steps of another patented method abroad and contributed to ClearCorrect US's conduct in the U.S. by exporting the digital data sets into the U.S., and that the importation of the digital data into the U.S. violated section 337.  On appeal, Judge Prost, applying administrative law's Chevron doctrine, concludes that the ITC's interpretation of the term "articles" is contrary to the literal text of the statute and thus not entitled to deference; rather, section 337 comes into play only when "articles" in the sense of "material things" are imported into the U.S.  In so ruling, the court distinguished the Federal Circuit's en banc ruling from this past August in Suprema, Inc. v. ITC, 796 F.3d 1338 (Fed. Cir. 2015)--a case in which the court upheld the ITC's interpretation of a different statutory term under Chevron--stating that in Suprema
the respondent violated 19 U.S.C. § 1337 by inducing a direct patent infringement that did not occur until after a tangible item was imported into the United States. Our opinion turned exclusively on the term “infringe” as used in 19 U.S.C. § 1337(a)(1)(B)(1). Conversely, here we are exclusively looking to the meaning of the term “articles.” Furthermore, the “articles” in question in Suprema were physical objects, and thus do not inform the question now before the court. Indeed the analysis in Suprema supports the decision here, as discussed infra
 Judge O'Malley concurs and Judge Newman dissents. 

For discussion of the oral argument in this case from last August, see this post by Professor Sapna Kumar on Patently-O.  Professor Kumar's article pointed to a misquotation of the 1922 Tariff Act in the ITC's opinion, which Judge Prost now notes in the Federal Circuit majority opinion at pp. 33-34 (referring to the ITC's "omission of the phrase 'in the importation of goods'" as "highly misleading"). 

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