{"id":1931,"date":"2015-07-29T08:34:25","date_gmt":"2015-07-29T12:34:25","guid":{"rendered":"http:\/\/cpip.gmu.edu\/?p=1931"},"modified":"2026-04-09T19:23:13","modified_gmt":"2026-04-09T19:23:13","slug":"digital-goods-and-the-itc-the-most-important-case-that-nobody-is-talking-about-2","status":"publish","type":"post","link":"https:\/\/blogs.uakron.edu\/ualawip\/2015\/07\/29\/digital-goods-and-the-itc-the-most-important-case-that-nobody-is-talking-about-2\/","title":{"rendered":"[Archived Post] Digital Goods and the ITC: The Most Important Case That Nobody is Talking About"},"content":{"rendered":"

By Devlin Hartline & Matthew Barblan<\/em><\/p>\n

In its ClearCorrect<\/em> opinion from early 2014, the International Trade Commission (ITC) issued cease and desist orders preventing the importation of infringing digital goods into the United States. The ITC\u2019s 5-1 opinion<\/a> has since been appealed to the Federal Circuit, with oral argument scheduled<\/a> for the morning of August 11th, and the case has drawn a number of amicus<\/em> briefs on both sides. Despite receiving little attention in media or policy circles, the positive consequences of the ITC\u2019s decision are significant.<\/p>\n

This case is important because the problem of the importation of infringing digital goods continues to grow. The ITC\u2019s authority over digital goods can be a powerful tool for creators and innovators against a threat that has only gotten worse, and it would permit the ITC to go about doing what it\u2019s always done in the intellectual property space\u2014protecting our borders from the threat of foreign infringing goods. Interestingly, a look at the proceedings in the ITC and the briefs now before the Federal Circuit reveals how some parties now opposing the ITC\u2019s authority over digital goods had argued for the opposite just a few years back.<\/p>\n

The ITC Proceedings<\/strong><\/h2>\n

This case began in March of 2012, when Align Technology Inc. filed a complaint with the ITC alleging that its only competitor, ClearCorrect Operating LLC, violated Section 337<\/a> of the Tariff Act of 1930 by importing digital goods that infringed several of its orthodontic patents. Section 337, codified at 19 U.S.C. \u00a7 1337<\/a>, makes unlawful the \u201cimportation . . . of articles\u201d that infringe \u201cvalid and enforceable\u201d patents, copyrights, or trademarks, and it declares that the ITC \u201cshall investigate any alleged violation of this section on complaint under oath or upon its initiative.\u201d<\/p>\n

There are two statutory remedies available to a complainant in an ITC proceeding. The first is an exclusion order, which dictates that \u201cthe articles concerned . . . be excluded from entry into the United States.\u201d Exclusion orders are issued by the ITC and enforced by the U.S. Customs and Border Protection. The second remedy is a cease and desist order, which directs any person violating Section 337 \u201cto cease and desist from engaging in the unfair methods or acts involved.\u201d The ITC enforces its own cease and desist orders through the imposition of civil penalties, recoverable in the federal district courts.<\/p>\n

Align\u2019s complaint with the ITC involved its patented Invisalign System<\/a>, a \u201cproprietary method for treating crooked and misaligned teeth\u201d using modern plastic aligners instead of old-fashioned metal braces. Align alleged that ClearCorrect violated Section 337 by importing \u201cdigital models, digital data and treatment plans that . . . infringe or induce infringement of\u201d its patents, and it asked the ITC to \u201cissue permanent cease and desist orders\u201d prohibiting ClearCorrect from importing the digital files. In response, ClearCorrect argued that \u201cno articles\u201d had been imported since the digital data associated with the teeth aligners were not themselves \u201carticles.\u201d<\/p>\n

This was the primary bone of contention: The ITC only has statutory authority over the \u201cimportation . . . of articles,\u201d and if digital goods are not \u201carticles,\u201d then the ITC has no jurisdiction. After an administrative law judge (ALJ) determined that the digital files at issue were indeed \u201carticles\u201d within the meaning of Section 337, ClearCorrect petitioned the ITC to review that determination. The ITC took the case and solicited comments from the public as to whether electronic transmissions are \u201carticles\u201d under Section 337.<\/p>\n

The ITC ultimately sided 5-to-1<\/a> with Align. On the threshold issue of whether electronic transmissions constitute \u201carticles\u201d under Section 337, the ITC affirmed the ALJ\u2019s conclusion that they do: \u201c[T]he statutory construction of \u2018articles\u2019 that hews most closely to the language of the statute and implements the avowed Congressional purpose for Section 337 encompasses within its scope the electronic transmission of the digital data sets at issue in this investigation.\u201d This was consistent, said the ITC, with the \u201clegislative purpose . . . to prevent every type of unfair act in connection with imported articles . . . and to strengthen protection of intellectual property rights.\u201d<\/p>\n

Appeal to the Federal Circuit<\/strong><\/h2>\n

Having lost at the ITC, ClearCorrect appealed to the Federal Circuit. There, it focused its arguments on the statutory question of whether digital goods constitute \u201carticles\u201d under Section 337.<\/p>\n

Public Knowledge and the Electronic Frontier Foundation (EFF) filed an amicus<\/em> brief calling the ITC\u2019s decision \u201csweeping and unprecedented,\u201d and they urged the Federal Circuit to reject the ITC\u2019s \u201coverzealous construction\u201d of the term \u201carticles.\u201d Aside from the statutory issue, the digital rights groups suggested that there were \u201cimportant reasons\u201d why Section 337 \u201cought not<\/em> cover telecommunications.\u201d They stressed the \u201creal and unanswered questions about the enforcement role\u201d ISPs would play, and they noted how ISPs \u201ccould be required to actively block transmission of certain content.\u201d<\/p>\n

It\u2019s worth noting that no ISPs were involved in the ClearCorrect litigation\u2014only ClearCorrect itself was subject to a cease and desist order. But this ISP question seems to be the reason why the case drew their attention: The real concern wasn\u2019t whether ClearCorrect had infringed Align\u2019s patents; it was whether the ITC had the authority to issue cease and desist orders to ISPs. This sentiment was echoed in an amicus<\/em> brief by the Internet Association, which includes Google, arguing that the internet \u201cshould not be restricted to national borders\u201d because of \u201cthe unforeseeable but far-reaching results that would follow.\u201d<\/p>\n

The policy arguments made by Public Knowledge, the EFF, Google, and others were essentially circular: The internet should be \u201copen\u201d so we shouldn\u2019t let the ITC \u201cclose\u201d it. But that begs the question of what the ideal \u201copen\u201d internet looks like, and what illegal activities should or should not be tolerated in the digital space. We shut our borders to infringing physical goods. What makes infringing digital goods so special? A right is only as good as the remedies available to enforce it, so why should we give short shrift to the property rights of artists, creators, and innovators?<\/p>\n

Align\u2019s intervenor brief took the groups to task: \u201cThe amici<\/em> briefs supporting ClearCorrect brim with hyperbole.\u201d Align noted that the ITC \u201conly asserts jurisdiction over the \u2018articles\u201d that are electronically transmitted, not over all acts of transmission.\u201d It pointed out that it is the \u201cowner, importer, or consignee\u201d of the \u201carticles\u201d that violates Section 337, not the carrier, and it said that the claim that the ITC could issue cease and desist orders against ISPs for \u201cdata transmission activities<\/em>\u201d is \u201cbaseless.\u201d<\/p>\n

Supporting the ITC\u2019s understanding of \u201carticles,\u201d an amicus<\/em> brief filed by the Association of American Publishers explained that the ITC\u2019s \u201cauthority over electronically transmitted copyrighted works is critical because . . . there has been rapid growth in digital publications.\u201d It pointed to the rise in digital piracy \u201cat the expense of U.S. creators and innovators.\u201d It urged that affirming the ITC\u2019s decision was \u201ccrucial\u201d since it \u201cwill help ensure that unfair trade practices abroad do not harm the livelihoods\u201d of those that \u201crely on copyright protection.\u201d<\/p>\n

An amicus<\/em> brief filed by Nokia supporting the ITC also noted the importance of protecting intellectual property: \u201cStripping the Commission of its long-exercised authority over electronic transmissions could gravely damage the protection of valid patent rights through Section 337 investigations.\u201d It pointed out that holding otherwise would lead to \u201cabsurd results\u201d since the ITC would have jurisdiction over software \u201cimported on a USB stick or CD-ROM\u201d but not software disseminated by \u201celectronic transmission.\u201d Such a result would be \u201cwholly contrary to the remedial purpose of Section 337.\u201d Nokia concluded that the ITC\u2019s \u201cauthority should not wax and wane as technology develops new methods of dissemination.\u201d<\/p>\n

The MPAA and the RIAA likewise submitted an amicus<\/em> brief supporting the ITC. The industry groups pointed out that \u201cillegal downloads and illegal streaming\u201d account for most of the infringement losses they suffer, and they argued that \u201ccopyright protection is essential to the health\u201d of their industries. They urged the Federal Circuit to affirm the ITC because \u201cSection 337 is a powerful mechanism for stopping illegal electronic imports,\u201d and doing so \u201cwould give effect to the intent of Congress that Section 337 protect U.S. industries from all manner of unfair acts in international trade.\u201d<\/p>\n

Who has the better argument here? Obviously, both sides argued that the text of Section 337 favored their positions. ClearCorrect and its supporters claimed that \u201carticles\u201d should be interpreted narrowly to include only tangible goods, while the ITC and its supporters wanted a read of the statute that allows the ITC to continue to fulfill its mission even as new technology and methods of trade become more common. What may come as a surprise, however, is that many of the groups now seeking to limit the ITC\u2019s jurisdiction were arguing just the opposite a few years ago.<\/p>\n

Remember the OPEN Act?<\/strong><\/h2>\n

It may seem like ages ago, but it\u2019s been less than four years since Congress debated the Stop Online Piracy Act<\/a> (SOPA) and the PROTECT IP Act<\/a>. Those two bills would have explicitly afforded artists and creators robust tools to use in the federal district courts against foreign rogue sites that aim their infringements at the United States. Many vocal opponents of the bills supported an alternative approach: the OPEN Act<\/a>. Under the OPEN Act, the ITC would have been given explicit authority to investigate complaints against foreign rogue sites that import infringing digital goods<\/em> into the United States.<\/p>\n

The OPEN Act\u2019s sponsors set up a website at keepthewebopen.com<\/a> where members of the public could see the text of the bill and suggest changes to it. The website included an FAQ<\/a> to familiarize supporters with the thinking behind the OPEN Act. As to why online infringement was an issue of international trade, the FAQ pointed out that \u201cthere is little difference between downloading a movie from a foreign website and importing a product from a foreign company.\u201d<\/p>\n

When advocating for the OPEN Act as a good alternative to SOPA and the PROTECT IP Act, the bill\u2019s sponsors touted the ITC<\/a> as being a great venue for tackling the problems of foreign rogue sites. Among the claimed virtues were its vast experience, transparency, due process protection, consistency, and independence:<\/p>\n

For well over 80 years, the independent International Trade Commission (ITC) has been the venue by which U.S. rightsholders have obtained relief from unfair imports, such as those that violate intellectual property rights. Under Section 337 of the Tariff Act of 1930 \u2013 which governs how the ITC investigates rightsholders\u2019 request for relief \u2013 the agency already employs a transparent process that gives parties to the investigation, and third party interests, a chance to be heard. The ITC\u2019s process and work is highly regarded as independent and free from political influence and the department already has a well recognized expertise in intellectual property and trade law that could be expanded to the import of digital goods.<\/p>\n

The Commission already employs important safeguards to ensure that rightsholders do not abuse their right to request a Commission investigation and the Commission may self-initiate investigations. Keeping them in charge of determining whether unfair imports \u2013 like those that violate intellectual property rights \u2013 [sic<\/em>] would ensure consistent enforcement of Intellectual Property rights and trade law.<\/p><\/blockquote>\n

Some of the groups now arguing that the ITC shouldn\u2019t<\/em> have jurisdiction over digital goods openly supported the OPEN Act. Back in late 2011, the EFF stated<\/a> that it was \u201cglad to learn that a bipartisan group of congressional representatives has come together to formulate a real alternative, called the OPEN Act.\u201d The EFF liked the bill because the \u201cITC\u2019s process . . . is transparent, quick, and effective\u201d and \u201cboth parties would have the opportunity to participate and the record would be public.\u201d It emphasized how the \u201cprocess would include many important due process protections, such as effective notice to the site of the complaint and ensuing investigation.\u201d<\/p>\n

Google likewise thought that giving the ITC jurisdiction over digital goods was a great idea. In a letter posted to its blog<\/a> in early 2012, Google claimed that \u201cthere are better ways to address piracy than to ask U.S. companies to censor the Internet,\u201d and it explicitly stated that it \u201csupports alternative approaches like the OPEN Act.\u201d Google also signed onto a letter<\/a> promoting the virtues of the ITC: \u201cThis approach targets foreign rogue sites without inflicting collateral damage on legitimate, law-abiding U.S. Internet companies by bringing well-established International trade remedies to bear on this problem.\u201d<\/p>\n

Conclusion<\/strong><\/h2>\n

The ITC has been protecting our borders against the importation of infringing goods for nearly a century now. As technology and trade evolves, it makes perfect sense to let the ITC continue to do its job by protecting our borders against the importation of infringing digital <\/em>goods. This is an important tool for our innovators and creators in combating the ever-growing flood of foreign infringing goods.<\/p>\n

The fact that many of those who supported the OPEN Act are now supporting ClearCorrect suggests that for them this appeal isn\u2019t really about whether digital goods are \u201carticles\u201d under Section 337. The ITC is an appropriate venue for all of the reasons the supporters of the OPEN Act publicized just over three years ago: The process is transparent, there\u2019s ample due process protections, the commissioners are experienced and independent, and their decisions are consistent.<\/p>\n

As the 5-1 opinion suggests, affirming the ITC\u2019s decision should be an easy choice for the Federal Circuit. Let\u2019s hope the Federal Circuit does the right thing for our artists and innovators.<\/p>\n","protected":false},"excerpt":{"rendered":"

By Devlin Hartline & Matthew Barblan In its ClearCorrect opinion from early 2014, the International Trade Commission (ITC) issued cease and desist orders preventing the importation of infringing digital goods into the United States. The ITC\u2019s 5-1 opinion has since been appealed to the Federal Circuit, with oral argument scheduled for the morning of August […]<\/p>\n","protected":false},"author":3627,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_monsterinsights_skip_tracking":false,"_monsterinsights_sitenote_active":false,"_monsterinsights_sitenote_note":"","_monsterinsights_sitenote_category":0,"_jetpack_memberships_contains_paid_content":false,"footnotes":""},"categories":[2,10,21,26,28,29,30,31,35,46,48,53,1],"tags":[113,126,292,435,551,687,745,746,1042,1173,1325,1371],"class_list":["post-1931","post","type-post","status-publish","format-standard","hentry","category-administrative-agency","category-copyright","category-high-tech-industry","category-innovation-2","category-international-law","category-internet","category-inventors","category-itc","category-patent-law","category-remedies","category-software-patent-high-tech-industry","category-trademarks","category-uncategorized","tag-align","tag-amicus-brief","tag-clearcorrect","tag-digital-goods","tag-federal-circuit","tag-importation","tag-isp","tag-itc","tag-open-act","tag-protect-ip-act","tag-section-337","tag-sopa"],"jetpack_featured_media_url":"","jetpack_sharing_enabled":true,"_links":{"self":[{"href":"https:\/\/blogs.uakron.edu\/ualawip\/wp-json\/wp\/v2\/posts\/1931","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/blogs.uakron.edu\/ualawip\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/blogs.uakron.edu\/ualawip\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/blogs.uakron.edu\/ualawip\/wp-json\/wp\/v2\/users\/3627"}],"replies":[{"embeddable":true,"href":"https:\/\/blogs.uakron.edu\/ualawip\/wp-json\/wp\/v2\/comments?post=1931"}],"version-history":[{"count":2,"href":"https:\/\/blogs.uakron.edu\/ualawip\/wp-json\/wp\/v2\/posts\/1931\/revisions"}],"predecessor-version":[{"id":16931,"href":"https:\/\/blogs.uakron.edu\/ualawip\/wp-json\/wp\/v2\/posts\/1931\/revisions\/16931"}],"wp:attachment":[{"href":"https:\/\/blogs.uakron.edu\/ualawip\/wp-json\/wp\/v2\/media?parent=1931"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/blogs.uakron.edu\/ualawip\/wp-json\/wp\/v2\/categories?post=1931"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/blogs.uakron.edu\/ualawip\/wp-json\/wp\/v2\/tags?post=1931"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}