The Madness of the ITC, Part 2: Is Its Reach Exceeding Its Grasp?

The Madness of the ITC, Part 1: The Invisalign Case

The U.S. Trade International Trade Commission has broad investigative powers on matters of trade, gathering and analyzing trade data, and providing it to the White House and Congress to help formulate U.S. international trade policies.

Its statutory authority is based on the Tariff Act of 1930, the Agricultural Adjustment Act of 1933, the Trade Expansion Act of 1962, the Trade Act of 1974, the Trade Agreements Act of 1979, the Trade and Tariff Act of 1984, the Omnibus Foreign Trade and Competitiveness Act of 1988, and the Uruguay Round Agreements Act of 1994.

The latest of these agreements is now 20 years old, and it is the age of the statutes governing the ITC that proponents of its decision regarding digital files cite as justification for that ruling. The ITC is behind the times, they contend, and it needs to catch up.

Arguments Supporting the Invisalign Ruling

Law firm Morrison & Foerster issued a client alert arguing in support of the ITC’s decision:

“As 3D printers and other forms of rapid computer-aided manufacturing become more available to the general public, it is important that the Commission continue to assert jurisdiction over modern forms of importation to prevent the erosion of the protection of intellectual property under Section 337,” wrote coauthors G. Brian Busey and Kirk A. Sigmon.

The argument may be valid.

“The transmission of a valuable, trade-related article, such as the digital designs [in the Invisalign case], constitute a subversion or circumvention of patent rights,” said Raymond Van Dyke, principal of Van Dyke Law .

The ITC “is reacting to protect the rights and properties of U.S. IP holders,” he told TechNewsWorld. “With the ongoing drive to digital, this protection is necessary and expected.”

3D printing technology presents “many challenges” to IP, Van Dyke noted, and “time will tell how this new technological revolution turns out.”

About Section 337

Section 337 gives the ITC the authority to investigate and issue decisions on unfair methods of competition and unfair acts in the importation or sales of imported articles, and to provide relief to U.S. industries that can prove they’re victims of such competition or acts.

The ITC over time has asserted Section 337 jurisdiction in related issues, including violations of the Digital Millennium Copyright Act, violation of country of origin marking when coupled with evidence of consumer confusion or U.S. consumer preference for domestically produced articles, and trade libel.

Hands Off, ITC!

“The ITC is a trade court that may only hear the cases specified in its statute,” said Abigail Slater, vice president of legal and regulatory policy at The Internet Association.

The Invisalign case is being appealed in the Federal Circuit Court, and “It is important for the court to clarify that the ITC act does not extend the scope of exclusive rights beyond the intent of Congress,” she told TechNewsWorld.

“The potential problem with the ITC’s ruling is that it’s not clear that it follows the law,” said Derek Bambauer, professor of law at the University of Arizona’s James E. Rogers College of Law.

Both the Federal Circuit and U.S. Supreme Courts “have precedent that suggests strongly the ITC got it wrong,” he told TechNewsWorld.

Bambauer was referring to Bayer AG v. Housey Pharma and Microsoft v. AT&T, respectively.

However, the larger concern “is if the ITC feels empowered to develop doctrine under 337 that is not contiguous with the Federal Circuit’s patent jurisprudence,” Bambauer said. “That creates uncertainty which is not helpful for innovators.”

The ITC is overreaching because it “is taking an aggressive position on its definition of its scope of authority under 337,” Bambauer argued.

So What Is Data?

Intellectual property can be exchanged for goods, money or labor, so “it might as well be considered a financial exchange, in which case it would fall under banking regulation and not trade regulation,” Mike Jude, a program manager at Frost & Sullivan, told TechNewsWorld.

Potentially any data file with value would come under regulation, impacting businesses everywhere, if the ITC were to assert its jurisdiction over data files, Jude warned.

“What if the data in question is a financial exchange, being data connected with bank accounts or the movement of money? Would the ITC then still have jurisdiction over it?” he asked.

“What if you had to consider the value of each email you sent?” Jude continued. “What if the ITC demanded examination of every data file in order to assess regulatory interests? This is a morass which could literally shut down any data-centric service with international connections.”

The ITC, which is “a specialized commission of limited and particular authority supplemental to ordinary patent adjudication, is not the right body to be dealing with this class of cases involving data transmissions,” said Charles Duan, director of the patent reform project at Public Knowledge.

“Thus, the concerns about circumventing Section 337, which some commentators have raised, are misplaced,” he told TechNewsWorld.

The ITC’s ruling “presents no limit on what subject matter falls within the scope of the ruling,” Duan continued.

“To the extent that the ITC is restricting importation improperly, it deprives American consumers,” he contended. “That harm should certainly be concerning, and demand careful scrutiny of the ITC’s actions.”