An International Trade Commission exclusion order issued last year regarding to infringement by “importation” (transmission into the US) of digital data has been reversed and remanded by the U.S. Court of Appeals for the Federal Circuit as assuming authority outside the ITC’s jurisdiction. In doing so, the Federal Circuit rebuked the ITC for assuming, under the 1922 statute at issue, authority to exclude “articles” that could not possibly have been the subject of “unambiguously expressed [Congressional] intent” at that time.
The ITC has authority to issue exclusion orders preventing “articles” that infringe a patent from being imported into the United States. Goods that are subject to an exclusion order but nonetheless imported are subject to seizure by Customs and Border Patrol at the point of entry into the US and, ultimately, forfeiture by the importer. While no money damages are recoverable, often the exclusion order has the effect of an injunction, preventing a competitor from bringing products into the marketplace. In addition, the ITC may issue cease-and-desist orders against sale or distribution of any domestic inventory already within the country. ITC administrative proceedings are thus often useful in their own right, but are also commonly pursued in conjunction with federal district court infringement actions.
The infringing “articles” that were subject of the exclusion order in the test case were digital models of human teeth. The technology at issue relates to orthodontic appliances known as “aligners” used in incrementally adjusting the position of a patient’s teeth. The tooth positions are incrementally adjusted from a starting set of positions to desired end positions using successively installed aligners moving the tooth positions over time. The models transmitted into the United States by the accused infringer included initial, intermediate, and final tooth position models used to 3D print physical models, which in turn are employed to create each incremental aligner. The ITC interpreted its authority as extending over importation of such digital data – effectively expanding the traditional scope of authority assumed at the ITC.
In reviewing the ITC expansion of authority, the Federal Circuit noted that “articles” had consistently been interpreted to mean material or tangible goods that could actually be physically seized at the border. Even one member of the Commission, noted the Court, had understood the incongruity of “seizing” digital data:
As Commissioner David S. Johanson points out in his dissent, an “exclusion order directed against electronic transmissions could not only have no effect within the context of Section 337—it simply would make no sense as it would not be enforce[able].”
A concurring opinion rather sternly characterized the ITC’s decision as, in effect, an effort by an administrative agency to preempt the legislative prerogative of Congress. The dissent, however, noted that Customs already interprets Internet transmission into the US as “importation” under a governing statute that classifies software as “merchandise.”
The ITC decision had been supported by the Motion Picture Association of America and the Recording Industry Association of America, under an apparent hope that the expanded ITC jurisdiction might provide a new anti-piracy tool. The Electronic Frontier Foundation opposed the power-grab as anathema to a free and open Internet.