Will the Federal Circuit or Congress boost the ITC’s ability to block the importation of infringing digital files?

Section 337 of the Tariff Act of 1930 authorizes the International Trade Commission (ITC) to halt the importation of articles that infringe patents and other intellectual property rights. Until late last year, the ITC used this authority to block imports of digital files in response to allegations of patent infringement. However, the Federal Circuit upended that tactic in November when it ruled that “articles” do not include digital data files.

The Federal Circuit’s ruling in ClearCorrect Operating LLC v. International Trade Comm’n (Fed. Cir. Nov. 10, 2015) related to a situation in which the ITC acted on a complaint filed by Align Technology, Inc., which asserted that a Pakistan-based company and its U.S. subsidiary infringed Align’s patents for methods of creating and using orthodontic aligners. The court noted that “the only purported ‘article’ found to have been imported was digital data that was transferred electronically, i.e., not digital data on a physical medium such as a compact disk or thumb drive.”

The Tariff Act does not define the term “article,” so the court looked at various dictionary definitions, as well as other sections of the Tariff Act, and concluded that intangibles such as digital data are not “articles” that are within the ITC’s authority to block. The court also noted that Congress has debated various updates to the relevant sections of the Tariff Act in recent years, but it has not implemented any changes that would update the Act to expressly include digital data within the ITC’s authority.

The ITC has requested an extension of time (through January 27) to request an en banc rehearing of the decision. It is widely expected that the ITC will file the rehearing petition.

The ClearCorrect decision followed another Federal decision (Suprema v. International Trade Comm’n) that expanded the ITC’s authority to block importation of devices (e.g., fingerprint scanners) that are not infringing upon entry into the U.S., but which do infringe after certain software is loaded on the devices. Some may view the Suprema and ClearCorrect decisions to be at odds with each other. If the Federal Circuit revises the ClearCorrect decision in a rehearing, the result could create a significant roadblock for importers of products, software and data sets that infringe U.S. intellectual property rights.

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