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Electronic Transmissions Are Not ‘Articles’ for Exclusion in 337 Action

Electronic transmissions of digital data are not “articles” over which the International Trade Commission has jurisdiction to exclude under Section 337 of the Trade Act of 1930, 19 U.S.C. 1337. ClearCorrect Operating, LLC v. International Trade Commission, Fed. Cir., No. 2014-1527, 11/10/2015. According to the U.S. Court of Appeals for the Federal Circuit, it is clear from both the literal text of the statute and from the overall statutory scheme that “articles” means “material things.”

Background

ClearCorrect, with operations in the United States and Pakistan, produces orthodontic appliances known as aligners, used to incrementally re-position teeth to a final tooth arrangement after successive adjustments.

ClearCorrect US scans physical models of the patient’s teeth, creates a digital recreation of their initial tooth arrangement, and electronically transmits that digital recreation to ClearCorrect Pakistan. ClearCorrect Pakistan then creates digital data models of intermediate tooth positions which it transmits electronically to ClearCorrect US.

Align Technology, Inc. filed a complaint at the International Trade Commission, alleging infringement of its method patents on manufacturing and orthodontic aligners. It charged that ClearCorrect violated 19 U.S.C. §1337(a)(1)(B)(ii) by practicing its claimed methods abroad and importing (or transmitting) the resulting electronic data set to the United States.

ClearCorrect appealed.

Articles’ Does Not Include Electronic Data

The Federal Circuit rejected the Commission’s conclusion that data transmissions are “articles” subject to the Commission’s jurisdiction, explaining that the decision runs counter to the unambiguously expressed intent of Congress. While electronic transmissions have some physical properties—for example an electron’s invariant mass is a known quantity—common sense dictates that there is a fundamental difference between electronic transmissions and “material things,” according to Chief Judge Prost.

The Court acknowledged that deference is due the Commission’s interpretations of the statute governing its activities, but it pointed out that such deference is subject to the analysis of Chevron, U.S.A., Inc. v. Natural Res. Def. Council, Inc., 467 U.S. 837 (1984). Under Chevron, the Court explained, there are two basic questions: did Congress speak directly to the issue; and is the agency’s position based on a permissible construction of the statute.

In considering the plain meaning of the term “articles,” the Court looked not to the 1930 Tariff Act but to the 1922 Tariff Act, where the term “articles” was first introduced. However, it was not satisfied with the definition of that time advocated by the Commission—that an “article” is simply a particular item or thing that could be traded in commerce or used by consumers, including digital data. Judge Prost found that definition “imprecise at best,” and pointed to other dictionary definitions of the time, particularly the 1924 Dictionary of Tariff Information, that limit the meaning of the term to “material things.”

The aforementioned dictionaries make clear that the ordinary meaning of the term “articles” is “material things.” It is not a question of whether there are multiple definitions for us to choose between. Instead, every dictionary referenced by the Commission, with the exclusion of one imprecise definition, along with all the other relevant dictionaries point to the fact that “articles” means “material things.” As we “must presume that [the] legislature says in a statute what it means and means in a statute what it says,” Conn. Nat’l Bank v Germain, 503 U.S. 249, 253-54 (1992), we conclude that “articles” does not cover electronically transmitted digital data.

In a footnote, the Court responded Judge Newman's dissent that computer software has been found to be a “material or apparatus,” and that the “articles” in the Tariff Act was intended to be all-encompassing. According to Judge Prost, the case cited by Judge Newman on computer software was an infringement case that said nothing about ITC jurisdiction; the case cited on the scope of the term “article” considered whether shapeless glass wool was within the ITC’s jurisdiction with nothing to say about whether the term “articles” encompasses intangible data.

The Court reversed and remanded the ITC decision.

Concurring and Dissenting Opinions

Judge O’Malley concurred, but said it was not necessary to rely on Chevron deference. Judge Newman dissented, arguing that the Court incorrectly holds that the ITC may only exclude imports that are “tangible.”  

To read the opinions in this case, click here.