Administrative Law--How Strict Interpretation of [section] 1337 Cost Creators the Right to Protect Intellectual Property--ClearCorrect Operating, LLC v. Int'l Trade Comm'n, 810 F.3d 1283 (Fed. Cir. 2015).

• Author: Ponder, Elizabeth Cohen

The Smoot-Hawley Act of 1930 (the Act) was enacted to increase tariffs as a response to the decreased U.S. agricultural prices on the world market. (1) Section 337 of the Act protects intellectual property rights by preventing the importation of items when they violate valid U.S. patents or copyrights. (2) In ClearCorrect Operating Limited Liability Co. v. International Trade Commission, (3) the United States Court of Appeals for the Federal Circuit considered whether the International Trade Commissioner (Commissioner)'s expansive definition of the term "articles" to include digital items in [section] 337 was reasonable. (4) The Federal Circuit rejected the Commissioner's expansive definition and held the term "articles" as used in [section] 337 only includes tangible, material items. (5)

Align Technology, Inc. (Align) filed a complaint against ClearCorrect Operating, LLC (ClearCorrect) for patent infringement. (6) Align and ClearCorrect both design and sell personalized series of orthodontic retainers, called aligners, which incrementally realign teeth. (7) To create the aligners, a doctor first scans the patient's teeth, then engineers design models of the molds needed to obtain the desired alignment, and finally, the patient's actual molds are created. (8) After a prescribed amount of time wearing an aligner, the patient switches aligners until the exact tooth position is reached. (9) Align holds a patent for the computer program that generates models of each incremental aligner that a patient would need to use. (10) ClearCorrect's associated company in Pakistan, ClearCorrect Pakistan Ltd., employed former employees of Align and used the patented technology to generate computer models of each incremental aligner needed, then electronically sent this information to ClearCorrect in the United States. (11)

Align filed suit against ClearCorrect and ClearCorrect Pakistan with the International Trade Commission (ITC), alleging multiple violations of [section] 337. (12) In 2013, an Administrative Law Judge (ALJ) conducted a hearing and issued an initial determination finding ClearCorrect infringed Align's patent, and recommended that the ITC Commissioner issue a cease and desist order regarding the digital importation of all aligner models from ClearCorrect Pakistan. (13) In doing so, the ALJ concluded that the ITC was within its scope of authority to expand the definition of "articles" in [section] 337(a)(1)(B) to include the electronic transfer of infringing information. (14) The Commissioner affirmed the ALJ's decision, and on the premise of holding authority, ordered a cease and desist. (15) ClearCorrect appealed the Commissioner's jurisdiction to the United States Court of Appeals for the Federal Circuit where the Court reversed and remanded the Commissioner's order for lack of jurisdiction and declared that [section] 337 "articles" pertains only to material items. (16)

In 1930, Congress enacted the Act as a protectionist response to the decrease of American agricultural goods on the global market. (17) Section 337 of the Act targets unfair practices for imported goods, including intellectual property. (18) The ITC was established to recommend appropriate tariffs to the U.S. government, but it has expanded its reach to international trade regulation, including violations of [section] 337. (19) The number of [section] 337 investigations has exponentially increased in recent years, with the largest number of recent investigations involving advanced technology products. (20) Because of its speedy forum and limited remedies, the ITC is a popular resource for companies seeking protection and will likely continue to see high numbers of cases. (21)

Congress authorized the Commissioner to adjudicate cases regarding subject matter contained in the Act. (22) The Commissioner is further provided deference in interpreting [section] 337, as long as the interpretation complies with the standards set out in Chevron, U.S.A., Inc. v. Natural Resource Defense Council, Inc. (23) Chevron dictates that courts should defer to an agency's interpretation following a two-step analysis of the statute: first the court must determine that the statute is ambiguous, then second, it must be determined that the interpretation is "a permissible construction of the statute." (24) If both steps are satisfied, courts are to defer to agencies' statutory interpretations because agencies have heightened experience and knowledge within their fields. (25) The Federal Circuit holds appellate jurisdiction over the ITC, as well as the power to interpret statutes and the power to reverse or uphold the Commissioner's decision. (26)

The doctrine of statutory stare decisis assumes congressional acquiescence or acceptance of executive acts and judicial decisions unless Congress amends the language of the statute. (27) Technological advancements occur much too quickly for the legislature to maintain up-to-date statutes, resulting in situations that require the courts and agencies to interpret statutes involving advanced technology as best as possible. (28) Those interpretations are then used to provide remedies that are designed to punish offenders and prevent future violations. (29)

In ClearCorrect Operating Limited Liability Co. v. International Trade Commission, the Federal Circuit used the plain meaning definition of "articles" from various dictionaries to include only material things. (30) It then determined "articles" cannot include intangible items, as the Commissioner had suggested, because that would render other subsections within [section] 337 "superfluous at best." (31) The Court also relied upon the Harmonized Tariff Schedule, as established in 1930, to support its argument that "articles" should be limited to tangible items because it provides descriptions of the types of items--all of which are tangible--intended to be inspected upon importation to the United States. (32) The Court held it was unnecessary to move to step two of Chevron because the term "articles" was unambiguous, therefore the Commissioner was not required to make an interpretation. (33) The Federal Circuit then rejected the Commissioner's jurisdiction and refused to defer to the agency. (34)

The concurrence argued there was no need to analyze the Commissioner's interpretation under Chevron because it found the ITC lacks jurisdiction from Congress to adjudicate cases involving international electronic transmissions. (35) The concurrence found it unlikely that Congress would give authority to the ITC to regulate the Internet, and argued it is Congress' duty to determine how the advancement of technology should be addressed. (36) Conversely, the dissent rejected the majority's choice to focus on the definition of "articles," rather than focusing on whether there was a remedy for the infringement. (37) The dissent opined that the Commissioner had jurisdiction to interpret [section] 337, the interpretation was reasonable, and the ITC had an appropriate remedy to impose on ClearCorrect for violating the statute. (38)

The Federal Circuit incorrectly overruled the Commissioner's interpretation of "articles" and replaced it with its own plain meaning interpretation. (39) Congress authorized the Commissioner to review and adjudicate cases involving ambiguous statutory terminology under [section] 337, by Congress through acquiescence, as well as by courts on multiple occasions. (40) "Articles" is not defined within the Act, and thus is an ambiguous term. (41) Following Chevron, the Commissioner has the authority to interpret "articles," and this interpretation should be upheld as long as it is reasonable. (42) The interpretation of [section] 337 should reflect the policy and purpose for which it was created. (43) Additionally, even if "articles" was originally defined as "material things," recent cases have interpreted "articles" to include digital information, and thus, the doctrine of statutory stare decisis requires the Court to uphold this interpretation. (44)

The purpose of [section] 337 is to protect intellectual property rights against unfair competition. (45) Courts are constantly at odds with technology and the congressional lag to keep up with the evolving digital world. (46) The majority opinion looked back in time for definitions of "articles" for this patent infringement issue; patents, however, are used for new technology, constantly advancing faster than the legislature can keep up. (47) Chevron authorizes agencies to interpret ambiguous statutes because of their experience and specialized knowledge in their particular fields, as long as the interpretation is not "arbitrary, capricious, or manifestly contrary to the statute." (48) Based on the ambiguity of the term "articles," the broad intention is to protect U.S. companies from foreign entities' unfair acts, and the remedy available to stop this behavior, the Commissioner's definition is reasonable and should be upheld. (49)

The Court created a loophole for fraudulent conduct when defining "articles" as only material items. (50) The Court noted that if the information were placed on an external data storage device, such as a compact disk or flash drive, and this device were shipped to the United States, remedies under [section] 337 would be appropriate; however, the Court determined [section] 337 is not appropriate because the information was transmitted electronically. (51) This provides a work-around the protections that the Act affords corporations' protected information merely by transmitting the same protected information electronically in stead of in a tangible medium without repercussion. (52) By rejecting the Commissioner's definition, the Court has rewarded unfair competitive behavior, violating the intended purpose of [section] 337, and opened the floodgates to legal violations of the statute. (53)

In ClearCorrect Operating Limited Liability Co. v. International Trade Commission, the United...