"Importing" data runs afoul of the ITC

Software developers who work and live outside of the US have taken comfort in being outside that legal jurisdiction, so they avoid the application of US patent law. However, the International Trade Commission (ITC), an arm of the US government that prohibits certain unfair business practices involving international trade, used a recent investigation as a chance to prohibit certain electronic transmissions from being sent into the US from outside the country. This is troubling for open-source communities and others, but businesses are fighting back.

The ITC report on the investigation, titled "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", initially looks rather mundane. In early 2012, California-based orthodontics company, Align Technology, claimed that its patents on orthodontics devices, and on systems and methods relating to those devices, were being infringed by Pakistan-based competitor ClearCorrect (which also operates in Texas). In its original March 2012 notice [PDF] to the public, the ITC characterized the alleged harm as stemming from the importation and manufacture for commercial purposes of those goods.

The alleged importation occurred when digital information that would be used to help make its products was transmitted electronically from ClearCorrect's Pakistan home to its Texas-based arm over the Internet. The issue of interest here for software developers, then, is whether or not information transmitted electronically into the US that could be used in patent infringing goods or services are "articles" being "imported" under the ITC's rules, and thus subject to its jurisdiction.

The ITC took a couple years to deliberate, with an initial determination made by an ITC administrative law judge in May 2013. The Commission's investigation came to a conclusion in April 2014, when it released its review [PDF] of the initial determination. In that review, the ITC found that ClearCorrect unlawfully transmitted its digital goods into the US, and ordered the company to cease and desist from further transmitting those specific goods into the country.

ClearCorrect appealed [PDF] soon after, with only mild success. It got a favorable ruling in July from the Court of Appeals for the Federal Circuit (CAFC), which ruled that the ITC had no legal authority to review the original judge's initial determination, but that determination still held that inbound electronic signals from outside the United States are imported articles.

Interested third-parties have decided to keep the case alive, as they are concerned about the impact the ITC's decision could have on them. In a recent amicus brief [PDF] to the CAFC, the Internet Association, a trade association made up of major companies including Twitter, Google, Amazon, Facebook, and Netflix, argued that the ITC had no legal basis to support its initial ruling. The organization formally asked the CAFC to overturn its decision. The Association's argument has five prongs:

First, that patents don't apply to transmissions of electronic information at all because they aren't physical goods: "Electronic transmissions lack the tangible, physical embodiment necessary to be eligible for patent-law protection." (page 6).

Second, that the ITC can't find a transmission infringing solely because it contributes to infringement after it is imported, despite the transmission alone not being infringing. At the time of importation, there was no infringement: "The holding below improperly treated the electronic transmissions as infringing articles even though the statute requires infringement at the time of importation" (page 7).

Third, that the ITC was wrong to say imported electronic goods can infringe method patents (like the patents on a method to use digital data sets to construct orthodontic devices, as in this case), because a method patent is just a recipe, and not an actual embodiment of an infringing activity: "Even if an electronic signal could be considered an infringing article, the ITC erred in holding that an article may infringe a method patent, which claims the performance of a series of steps, not a structure." (page 7).

Fourth, that the CAFC said repeatedly in past cases that the types of goods the ITC can prohibit have to be "tangible products" (page 8).

Lastly (and possibly most compellingly), that Congress didn't give the ITC any power to do what it's trying to do. The main stick that the ITC has to smack down what it sees as bad actors is the power to issue an "exclusion order". When the ITC issues an exclusion order, it's instructing US customs agents to block infringing goods from being brought into the country. Since it's totally impractical to tell border control to stop certain electronic signals from coming into the country, the ITC tried to get around the problem in this case by using a different stick: ordering ClearCorrect to cease and desist from importing its digital data sets relating to orthodontic devices via electronic transmission and from using the data sets already available to its Texas-based arm in its commercial products and services. However, written law states that the ITC can't use the latter stick if it can't use the former: "The ITC attempted to impose a cease-and-desist remedy, but the statute makes clear that the authority to issue cease-and-desist orders does not extend to cases where an exclusion order is unavailable" (page 9).

It is not hard to imagine how open-source enthusiasts would be concerned by an unsuccessful appeal. For example, Fedora does not package any software in its repositories that the project believes violate US patents. Some users (likely including at least a few US residents) get this software through third-party repositories, such as RPM Fusion. While the vast majority of RPM Fusion's public mirrors are hosted on servers outside the US, the fact that some of the contents may be transmitted to a US user who might engage in an infringing activity could make RPM Fusion subject to an ITC cease-and-desist order; an order to stop transmitting the infringing software into the US, with steep fines for non-compliance. That order could come about if some organization that holds US patents that read on some software provided by RPM Fusion made a complaint to the ITC. Enforcing the order on a non-US organization might be difficult for the ITC, but it would be somewhat painful, or at least annoying, for the organization in question.

The open-source community should be pleased by the fact that large Internet corporations are formally expressing their concern with this case. In addition, should the CAFC rule against ClearCorrect, an appeal to the Supreme Court, which has repeatedly disagreed with the CAFC's patent decisions, could result in an overruling. This case is one worth keeping an eye on.