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ITC reaffirms its power to bar digital file transfers

10 April 2014

The U.S. International Trade Commission has reaffirmed its power to ban electronic transmissions (such as pirated films or software) from the United States where those transmission infringe an intellectual property right or are otherwise based on an unfair trade practice. Civil penalties for violating such an ITC order can be twice the value of the imported article or USD100,000 per day, whichever is greater.

The U.S. International Trade Commission (ITC) has issued cease and desist orders against companies that were electronically importing digital data found to infringe U.S. patents. The decision settles any remaining ambiguity about the ITC's power to bar electronic data transmissions, such as pirated films or software, from abroad.

The decision came nearly two years after the ITC instituted Certain Digital Models, Digital Data, and Treatment Plans for Use, in Making Incremental Dental Positioning Adjustment Appliances, the Appliances Made Therefrom, and Methods of Making the Same (“Digital Models”). Align Technology filed the complaint against respondents ClearConenct US and ClearConnect Pakistan (ClearConnect), alleging that ClearConnect infringed its patented method of making patient-customized dental equipment. Align Technology alleged that ClearConnect collected patient data in the U.S., electronically transmitted it to Pakistan for analysis and processing, and then electronically transmitted it back into the U.S., where it manufactured the infringing dental equipment.
 
The Administrative Law Judge’s (ALJ) Initial Determination drew considerable attention from private parties. Google and Belles Katz submitted third party briefs arguing that electronically transmitted digital files are not “articles” under Section 337. Nokia, the Motion Picture Association of America, and the Association of American Publishers also submitted third party briefs, but in support of the complainant’s position that digital files electronically transmitted from abroad constituted imported articles within the ITC’s jurisdiction.
 

The ITC affirmed the ALJ’s decision to issue a cease and desist order barring ClearConnect’s digital importation of the processed data. The ALJ did not issue an accompanying exclusion order, which would instruct U.S. Customs and Border Protection (Customs) to seize covered products at the border, as is the practice where tangible articles are at issue. The ITC has previously found that such an order would be ineffective because Customs lacks the practical means to seize electronic transmissions and has determined not to regulate them.

From an enforcement perspective, the Digital Models decision provides a powerful tool for the intellectual property owner looking to stop infringing digital imports. In addition, it is important to remember that the ITC’s jurisdiction is not limited to the enforcement of federally registered intellectual property rights; the ITC can institute an investigation into other types of unfair acts as well, such as trade secret misappropriation and unfair competition claims.

The full Commission Opinion is not yet available to the public. Please feel free to contact our team with any questions about how this decision may affect your business.