Practice Spotlight – Is The Scope of Jurisdiction Changing at the International Trade Commission?

March 2016

By: Thomas P. McNulty

In two recent Federal Circuit decisions, the Court addressed the types of patent cases that can be brought before the International Trade Commission (“ITC”). Under these cases, the ITC has the power to prevent the importation of articles that do not themselves infringe a patent claim upon entry into the country, but which subsequently infringe a patent through use. The Commission’s jurisdiction was found not to extend, however, to the transmission of digital data not tied to the importation of a physical product.

The ITC was established to prevent unfair trade practices from foreign entities, and is empowered (among other things) to block the importation of goods that infringe United States patents, trademarks, and copyrights. With respect to patents, the ITC’s governing statute provides for jurisdiction to prevent importation of “articles that… infringe” a United States patent. 19 U.S.C. § 1337(a)(1)(B). The meaning of the term “articles that infringe” was pivotal in these recent decisions.

The first case, Suprema v. ITC, expanded the authority of the ITC to block the importation of goods under an inducement theory of infringement. Fingerprint scanners were imported into the United States along with a software development kit that provided instructions for creating the software necessary to run the scanners, but were not loaded with software until after importation. The scanners did not directly infringe at the time of importation, but did infringe method claims once loaded with software and used. The Federal Circuit, sitting en banc, resolved the question of whether the ITC can block importation of goods that do not infringe at the time of importation, holding that the ITC can halt non-infringing imports that result in post-importation infringement of a method claim under an inducement theory. The Court determined, pursuant to the Chevron standard, that the phrase “articles that … infringe” did not squarely address this question, and that the ITC’s interpretation finding jurisdiction was reasonable, based on the language of the statute as a whole and the policy of vesting the ITC with broad powers to remedy unfair trade acts. Notably, the Court upheld the ban on importation of the subject scanners over dissenting arguments that the scanners were capable of substantial non-infringing use, meaning that scanners that would have been put to non-infringing use were nonetheless banned.

Conversely, the ClearCorrect v. ITC and Align Tech decision held that the electronic transmission of purely digital data, with no accompanying physical product, did not qualify as an “article that infringes” and therefore its importation could not be barred by the ITC. In this case, customized digital “molds” were designed in Pakistan and transmitted to the United States, where they were used to create sequential tooth aligners to straighten a patient’s teeth.

The Federal Circuit determined that the term “articles” requires the importation of “material things” based on ordinary and natural definition of “articles.” As the statute was clear and unambiguous, no Chevron deference was given to the contrary determination of the ITC that “articles” by its plain meaning encompassed electronic data. The implications of this decision could be far-reaching in the modern, digital world – the term “articles” relates not only to patent infringement, but also to copyright infringement, and will limit the ITC’s ability to protect software and digital media under the copyright laws.

These decisions should be considered when determining whether to seek to enforce a patent through the ITC rather than (or in conjunction with) through a lawsuit in the Federal District Court. Bringing a patent case to the ITC offers several advantages over suing in a District Court:

  • A patentee can name multiple defendants, both within the United States and abroad, without having concerns over jurisdiction and venue.
  • The proceedings are much quicker than a typical district court litigation, running between twelve and sixteen months.
  • The patentee does not subject itself to counterclaims.
  • Discovery is often easier to obtain, particularly from foreign defendants, due to the different subpoena and sanction powers of the ITC; and
  • U.S. Customs authorities enforce the exclusion orders that result, which may be a stronger alternative to the private enforcement of injunctive relief offered by the courts.

These advantages are now available even where the direct infringement does not occur until after importation, as is often the case where it is the use by the customer that results in direct infringement, and the ITC should be given serious consideration in such circumstances, provided there is some physical item that is being imported. The ITC requires more detailed pleadings than in district court, and further requires showing that there is a domestic industry subject to harm from the infringement, which must also be considered. Finally, monetary damages are not available through the ITC, which should also be considered.