Source: http://revistajuridica.uprrp.edu/inrev/index.php/2017/06/29/digital-trade-after-clearcorrect-v-itc/
Timestamp: 2017-12-11 02:16:32
Document Index: 269444628

Matched Legal Cases: ['§ 1337', '§ 1337', '§ 1295', '§ 512', '§ 4001', '§ 230']

You are at:Home»Artículos»Digital trade after ClearCorrect v. ITC
By Claudia Delbrey on	 June 29, 2017 0 Comments
By: Daniel Limés Rodríguez*
“We recognize, of course, that electronic transmissions have some physical properties—for example an electron’s invariant mass is a known quantity—but commonsense dictates that there is a fundamental difference between electronic transmissions and ‘material things’.”[1]
In a globalized world where electronic transmissions are not only central to the general infrastructure of international commerce but are also, increasingly, the main distribution lines of certain commodities in trade, it would seem indispensable for nation-states to proactively address the generalized reliance on these ever-expanding lines of communication. However, in ClearCorrect Operating, LLC v. International Trade Commission the United States Court of Appeals for the Federal Circuit manifested the lack of clear regulation regarding electronic transmissions of digital data in international trade. The court reversed the International Trade Commission’s (“ITC”) decision and held that electronic transmissions of digital models, as digital data sets, are not articles under section 1337 and, therefore, lie outside of the ITC’s jurisdiction. In this brief note we will summarize the Court’s holding and extrapolate as to some of the repercussions and possibilities of an unregulated international digital trade.
I. ClearCorrect v. ITC
The ITC has authority to remedy unfair methods of competition and unfair acts in the importation of articles.[2] For example, the importation of articles that infringe a valid and enforceable patent are prohibited.[3] Align Technology, Inc. (“Align”) filed a complaint at the ITC against ClearCorrect Operating, LLC and ClearCorrect Pakistan (collectively “ClearCorrect”) alleging a violation of section 1337 for infringing several claims of various patents. The patents in question pertain to aligners, orthodontic appliances used to incrementally reposition the teeth through a series of intermediate positions. ClearCorrect, in the Unites States, would scan a patient’s teeth and create a digital representation of their position. The representation of the patient’s teeth positions was later electronically transmitted to Pakistan where the various intermediate positions were modeled and then sent back to the United States, where all those intermediate positions would be 3D printed, manufactured, and made available to the patient.
Align’s allegations focused on the transmission of the digital models of the various intermediate positions of a patient’s teeth in the process of arriving at the final desired position. The articles allegedly in violation of section 1337 were precisely those transmissions, from Pakistan and into the Unites States, of the digital data sets used to physically construct the different aligners per the corresponding stage of the patient’s treatment plan. The ITC found that ClearCorrect Pakistan infringed the relevant patent claims. It found that the transmission of those models violated section 1337, by interpreting that they were articles. ClearCorrect filed an appeal to the Court of Appeals for the Federal Circuit.[4]
B. Articles in Section 1337 Are Material Things
The court’s opinion, authored by Chief Judge Prost, focused on the definition of what constitutes articles under the Tariff Act of 1930 which prescribed section 1337. Under step-one of Chevron,[5] the court focused first on the “literal text, giving it its plain meaning.”[6] Since articles are not explicitly defined in the Tariff Act, the court looked at the predecessor of section 1337 in the Tariff Act of 1922, as well as a long list of contemporaneous dictionaries in order to establish the plain meaning of “articles” during the time the statute was enacted. The court concluded that “the meaning of the term ‘article’ at the time of the passage of the 1922 Tariff Act was a ‘material thing’ and thus would not include digital data.”[7]
Focusing on the use of articles in section 1337 and other sections of the Tariff Act of 1930, the court also concluded that if articles were to be interpreted as broadly as the ITC intended, numerous other subsections of the Act would be rendered inoperative. Particularly, if articles were to be defined as including intangibles, then several sections would be “superfluous at best,” such as the forfeiture subsection of section 1337.[8] Similarly, the court reasoned that the enforcement of the remedies of exclusion, or a cease and desist, would be rendered impossible to enforce with intangibles.[9]
Lastly, the Court of Appeals revisited the legislative history of, and subsequent amendments to, the Tariff Act of 1930 and confirmed that articles is limited to “material things”. Therefore, “the literal text, the context in which the text is found within Section [1]337, and the text’s role in the totality of the statutory scheme all indicate that the unambiguously expressed intent of Congress is that ‘articles’ means ‘material things’ and does not extend to electronically transmitted digital data.”[10]
Even though the court determined that Congress’s intent was unambiguous, they still addressed the fact that under step two of Chevron the ITC’s interpretation would also be unreasonable. The Court signaled out three problems with the ITC’s interpretation of articles: (1) most of the definitions quoted by the ITC actually run counter to their interpretation, yet they provide no analysis as to why they should not control; (2) there was a blatant omission, without mention, in a quote of a Senate Report being used as an authority on Congress’s intent to favor a broader interpretation, and (3) the use of current debates in Congress of certain bills that have not actually been passed, and that do not enlighten the issue of whether the ITC has jurisdiction over digital goods.[11]
C. Dissent and Denial of Petitions for Rehearing En Banc
Judge O’Malley wrote a brief concurring opinion arguing that this was one of those “extraordinary cases” where the two-step Chevron inquiry was inapplicable and that it should never get past what some call the Chevron step zero since Congress, unambiguously, never delegated this authority to the agency, the ITC.[12] On the other hand, Judge Newman wrote the dissenting opinion arguing, among other things, that digital data models are patentable and should be protected and not excluded under section 1337,[13] that “the intention to omit unforeseen, later-discovered technologies cannot be imputed to this statute,”[14] and that the “difficulty of enforcing a remedial statute is not grounds for judicial elimination of all remedy.”[15]
On March 31, 2016, the Court of Appeals for the Federal Circuit denied the petitions for rehearing en banc.[16] The order was accompanied by another dissenting opinion authored by Judge Newman where she elaborated on some of the issues she already addressed in her previous dissent. Additionally, Chief Judge Prost and Judge O’Malley authored a concurring opinion, which Judge Wallach joined, criticizing the “hodgepodge of other legislative enactments” cited in the dissent.[17] Align and the ITC elected not to appeal the decision to the Supreme Court of the United States.[18]
A. Digital Trade in the United States
The ClearCorrect controversy brings to light the difficulty of regulating and addressing the new technologies of the twenty-first century under the somewhat anachronistic statutes of early twentieth century, such as the Tariff Act of 1930. The panel majority saw it clearly:
Under these circumstances we think it is best to leave to Congress the task of expanding the statute if we are wrong in our interpretation. Congress is in a far better position to draw the lines that must be drawn if the product of intellectual processes rather than manufacturing processes are to be included within the statute.[19]
If the Court of Appeals were to validate the ITC’s interpretation, they would for all intents and purposes be usurping Congress’s legislative role without clarifying the correspondingly complex structure of amendments needed for dealing with the fluidity of electronic transmissions in international trade. Some have argued that, under a gridlocked Congress, the other branches will inevitably “take a more pronounced role in creating national policy.”[20] This would pose some serious issues, not only relating to the Court’s specific holding, but also in the larger context of a republican government where separation of powers is essential.
Additionally, under Donald Trump’s presidency, we should probably not expect to see any new legislation being passed regarding these complex issues. First, the “congressional gridlock” is fairly evident, up to the point that we can see a “law making without legislating” when Congress resorts to “gimmicks”,[21] such as the recent nuclear option.[22] Second, Trump’s presidency is somewhat plagued by inconsistencies. His administration is pushing for deregulation,[23] but it is also pushing against trade liberalization across borders.[24] Through these inconsistencies, and with a gridlocked congress, it seems hard to believe any substantial legislation will address the issues of digital trade and the electronic transmission of articles.
It is important to note that Congress has obviously addressed digital trade and electronic transmissions in other contexts, as Judge Newman’s dissents clearly point out. An example would be the Digital Millennium Copyright Act, with various provisions that cover novel aspects, such as the use of servers in the protection of copyrights.[25] However, Congress has not addressed electronic transmissions within the scope of the Tariff Act of 1930 and section 1337 specifically.[26]
B. Digital Trade in International Commerce
In the context of international commerce, one of the most pressing issues is the classification of digital products as goods or services. Specifically, should they be construed under the World Trade Organization’s General Agreement on Tariffs and Trade (GATT) or the General Agreement on Trade in Services (GATS).[27] The United States has argued in favor of a classification under the GATT, yet issues of how to comprehensively and definitively define digital trade, digital goods, and digital services abound, just as was exemplified in ClearCorrect.[28]
It is important to note that consensus at the international level might provide clarity at the local level. For example, the role of lobbyists and certain interest groups in a gridlocked Congress is, arguably, continually pushing towards polarization.[29] However, those lobbyists might encounter government officials who, according to the commitment theory, will be superseded by international law and unable to bend to the will of the particular interest groups and their protectionist agendas.[30] The role of special interest groups in matters relating to international trade and digital trade have been fairly common along the years, as is expected of large multinational corporations.[31]
Therefore, we should expect special interest groups to push for protectionist measures that would ensure the viability of their investments, such as patents or trademarks. This would be even more so, considering President Trump’s outspoken stance against trade liberalization. Furthermore, we could also easily envision them lobbying in favor of limited liability,[32] particularly for Internet Service Providers in light of possible section 1337 violations.[33]
The ClearCorrect litigation[34] highlights the more than usual lag between technological development and law making. It is the opinion of the author that the Court of Appeals for the Federal Circuit exercised an appropriate and accurate level of judicial restraint in not validating the ITC’s jurisdictional overreach. However, when faced with the lack of regulation in the growing and interconnected network of international digital trade –if it is in fact trade that is being accomplished– it would be difficult not to feel the need to clarify some of the issues that may arise. Particularly, we need comprehensive legislation and a particularized forum to attend the emerging controversies. As things stand in the United States and, particularly, in Congress, we shoud expect for this to take a while.
*The author is a second-year student at the University of Puerto Rico School of Law and Content Editor at the University of Puerto Rico Law Review.
[1] ClearCorrect Operating, LLC v. Int’l Trade Comm’n, 810 F.3D 1283, 1286 (Fed. Cir. 2015) (ClearCorrect I), reh’g denied, 819 F.3d 1334 (2016) (ClearCorrect II).
[2] 19 U.S.C. § 1337(a) (2017).
[3] 19 U.S.C. § 1337(a)(1)(B) (2017).
[4] 28 U.S.C. § 1295(a)(6) (2017).
[5] Chevron U.S.A., Inc. v. Natural Res. Def. Council, Inc., 467 U.S. 837 (1984).
[6] ClearCorrect I, at 1290 (quoting Hawkins v. United States, 469 F.3d 993, 1000 (Fed. Cir. 2006)).
[7] Id. at 1292.
[8] Id. at 1295.
[9] Id. at 1296-98.
[10] Id. at 1299.
[11] Id. 1299-1302.
[12] Id. 1302-03 (O’Malley, J., concurring).
[13] Id. at 1307 (Newman, J., dissenting)
[15] Id. at 1310.
[16] ClearCorrect Operating, LLC v. Int’l Trade Comm’n, 819 F.3d 1334 (2016).
[17] Id. at 1336 (Prost, C. J., concurring).
[18] Elizabeth Coffman, Another Victory for ClearCorrect: No Appeal for Align at the Supreme Court, CLEARLY… THE CLEARCORRECT BLOG (August 31, 2016) http://blog.clearcorrect.com/post/Another-victory-for-ClearCorrect-No-appeal-for-Align-at-the-Supreme-Court-.aspx (last visit April 18,2017).
[19] ClearCorrect I at 1302 (quoting Bayer AG v. Housey Pharmaceuticals, Inc., 340 F.3d 1367, 1376-77 (2003)).
[20] Michael J. Teter, Congressional Gridlock’s Threat to Separation of Powers, 2013 WIS. L. REV. 1097, 1100 (2013).
[21] Id. at 1160.
[22] Ashley Killough & Ted Barret, Senate GOP Triggers Nuclear Option to Break Democratic Filibuster on Gorsuch, CNN (April 7, 2017), http://edition.cnn.com/2017/04/06/politics/senate-nuclear-option-neil-gorsuch/ (last visit April 18, 2017).
[23] To terminate the Environmental Protection Agency, H.R. 861, 115th Cong. (2017).
[24] Roger Lowenstein, Why Attacking Free Trade Is Great Politics and Bad Economics, FORTUNE (January 23, 2017), http://fortune.com/2017/01/23/trump-nafta-protectionism-tariffs-politics/ (last visit April 18, 2017).
[25] Digital Millennium Copyright Act, 17 U.S.C. §§ 512, 1201–1205, 1301–1332; 28 U.S.C. § 4001 (2017).
[26] ClearCorrect Operating, LLC v. Int’l Trade Comm’n, 810 F.3d 1283, 1303 (Fed. Cir. 2015) (O’Malley, J., concurring) (citing Online Protection and Enforcement of Digital Trade Act, S.2029/H.R. 3782, 112th Cong. (2012) (a bill proposing amendment of the Tariff Act to formally confer the ITC with jurisdiction over digital importation)).
[27] Sam Fleuter, The Role of Digital Products Under the WTO: A New Framework for GATT and GATS Classification, 17 CHI. J. INT’L L. 153 (2016).
[28] Id. at 162-63.
[29] Cynthia R. Farina, Congressional Polarization: Terminal Constitutional Dysfunction?, 115 COLUM. L. REV. 1689, 1720 (2015).
[30] Fleuter, supra note 27, at 170-71.
[31] See Sapna Kumar, Regulating Digital Trade, 67 FLA. L. REV. 1909 (2015) (This article addresses some of the significant issues behind the ClearCorrect litigation, including ample discussion of the role of special interest groups).
[32] ClearCorrect Operating, LLC v. Int’l Trade Comm’n, 810 F.3d 1283, 1303 (O’Malley, J., concurring) (citing Communications Decency Act of 1996, 47 U.S.C. § 230(b)(1), (c)(1) (2012) (a statute providing immunity from liability for Internet service providers)).
[33] Darlene Zou, Liability of Internet Service Providers Under Section 337: Why Digital Models Will Open the Door for ISP Liability on Imports that Infringe a U.S. Patent, 56 IDEA: J. FRANKLIN PIERCE FOR INTELL. PROP. 163 (2016).
[34] By “ClearCorrect litigation” we are referencing various separate but related controversies between Align and ClearCorrect that were, and some that still are, before the USPTO, ITC, and the District Courts.