Federal Circuit Panel Rules Commission Lacks Jurisdiction Over Digital Transmissions – On November 10, 2015, the Federal Circuit issued a 2-1 panel opinion in ClearCorrect Operating LLC v. ITC, Appeal No. 2014-1527, reversing the Commission’s decision that, according to the majority “expand[ed] the scope of its jurisdiction to include electronic transmissions of digital data.” The majority opinion by Chief Judge Prost and joined by Judge O’Malley concluded that the Commission’s decision concerning the scope of Section 337 was not entitled to deference under step one of the Supreme Court’s Chevron analysis because “it is clear that ‘articles’ means ‘material things,’ whether when looking to the literal text or when read in context” of the overall statutory scheme. Because the Tariff Act does not define “articles,” the majority looked to contemporaneous and modern general dictionaries, as well as the U.S. Tariff Commission’s contemporaneous Dictionary Of Tariff Information (1924), to limit the “ordinary or natural meaning” of “article” to “material things.” The majority also found that the broader statutory context supported such a meaning, agreeing with Commissioner Johanson’s dissent in the Final Commission Opinion that an “exclusion order directed against electronic transmissions could not only have no effect within the context of Section 337—it simply would make no sense as it would not be enforce[able].” Even if Chevron step two were required, the majority found that the Commission’s decision was unreasonable because the Commission “generat[ed] its own definition, unrelated to” and broader than the definitions for “article” found in the dictionaries on which it relied and the Commission “failed to properly analyze” and misquoted the legislative history of the Tariff Act. The majority stated that the Federal Circuit’s recent ruling in Suprema, Inc. v. ITC, Appeal No. 2012-1170, “does not control here” because Suprema turned exclusively on the meaning “infringe,” whereas the instant case focused exclusively on the meaning of “articles.” In a concurring opinion, Judge O’Malley wrote that Chevron analysis was not required in this instance: “If Congress had intended for the Commission to regulate one of the most important aspects of modern-day life, Congress surely would have said so expressly.” Judge Newman dissented, writing that the text and purpose of Section 337 show that the statute was designed to reach “every type and form” of unfair competition arising from importation, including that of “digital goods.” Criticizing the majority’s reliance on dictionaries from the 1920s, the dissent stated that “the intention to omit unforeseen, later-discovered technologies cannot be imputed” to Section 337; “the Tariff Act did not lock Section 337 into the technology in existence in 1922 or 1930.” The dissent also noted that other administrative agencies and the Court of International Trade have treated electronic transmission as “goods” imported into the United States and took issue with the majority’s “reliance on possible difficulty of enforcement against electronic transmission of infringing digital data,” noting that “difficulty of enforcing a remedial statute is not grounds for judicial elimination of all remedy.” Under Federal Circuit Rules of Practice, the Commission has 45 days from entry of judgment to petition for either panel rehearing or rehearing en banc.

Federal Circuit Affirms Commission Decision To Impose $6 Million Penalty On DeLorme For Violation Of Consent Order – In a 2-1 decision, the U.S. Court of Appeals for the Federal Circuit affirmed the Commission’s decision to impose a penalty in the amount of $6,242,500 against Respondents DeLorme Publishing Company, Inc. and DeLorme InReach LLC (collectively, “DeLorme”) for violating a Consent Order in the Section 337 investigation on Certain Two-Way Global Satellite Communication Devices, Inv. No. 337-TA-854. The Commission found that DeLorme had violated the Consent Order by assembling accused InReach 1.5 devices with converted, previously imported devices, and by assembling accused InReach SE devices using imported plastic housing components. The Federal Circuit affirmed the Commission’s decision even though two claims of the asserted patent that were the subject of the Consent Order had been invalidated in a later proceeding before the U.S. District Court for the Eastern District of Virginia. Instead, the Federal Circuit found that the Consent Order applied at the time DeLorme committed the acts found to violate the Consent Order. The Federal Circuit also found that the Commission’s penalty of more than $6 million was not excessive. The penalty represented a fine of $27,500 per day for 227 days of importations, which was only one-fourth of the amount of daily fines authorized by Section 337 for violations of cease-and-desist orders. The Federal Circuit also found no basis to reverse the Commission’s findings that DeLorme acted in bad faith or that the violative sales greatly benefitted DeLorme. Finally, Judge Taranto dissented from the affirmance of the penalty order on the ground that the Commission was not allowed to consider the effect of the invalidation of the asserted patent on the enforcement of the civil penalty for pre-invalidation violations of the Consent Order. 

ITC Trial Lawyers Association Hosts Annual Meeting On November 12, 2015 – The ITCTLA held its annual meeting on November 12, 2015 in the main Commission hearing room. Opening remarks by Chairman Hon. Meredith Broadbent were followed by a presentation by Dax Terrill, Senior Attorney-Advisor, IPR Branch of the Bureau of Customs and Border Protection (“CBP”). Mr. Terrill reported that the issuance of a new inter partes proceeding to replace the current ex parte process to issue CBP’s exclusion order-based rulings is expected soon. Other highlights of the meeting included a presentation by Juliana Cofrancesco, Attorney Advisor for Chairman Broadbent, on Section 337 trends. Ms. Cofrancesco noted that the total number of investigations for fiscal year 2015 was eighty-eight (88), with fifty (50) completed investigations, down from the high of one hundred twenty-nine (129) total investigations in 2011. Since October 1st, ten (10) new complaints have already been filed in FY 2016, in which there currently are forty two (42) active matters. The Commission successfully reduced the time to target date for completed investigations to 15.6 months in FY 2015, down from 19.7 months in FY 2014. Fifty-nine (59) percent of the investigations were terminated by settlement or consent order in FY 2015, and a violation was found in sixty-four (64) percent of those investigations that proceeded to a final determination. Since 2010, the Commission has delegated fact finding to the Administrative Law Judge on the public interest in fifty-one investigations. In a Q&A panel with Chief Judge Bullock and Judges Pender, Shaw, and Lord, one of the resounding messages from the ALJs was to file manageable cases by not asserting too many patents and claims. The Judges also are receptive to receiving focused motions for summary determination on dispositive issues, particularly Judge Lord, who advised that she sometimes triggers parties to file them. A copy of the Commission’s Section 337 Mediation Program Sixth Update, Publication No. 4579 (November 2015) was distributed at the meeting.

Chief ALJ Bullock Finds Violation Of Converse’s Trademark Rights In 936 Investigation – On November 17, 2015, a Notice issued in Certain Footwear Products, Inv. No. 337-TA-936 advising that Chief ALJ Charles Bullock issued an initial determination on violation of Section 337 finding that certain footwear products of Respondents Wal-Mart, Skechers, Ash Footwear and New Balance violated Complainant Converse’s registered trademark rights in the iconic Chuck Taylor All Star sneaker, but not as to the asserted common law trademarks. This Update will report on Chief Judge Bullock’s findings, conclusions of law and recommended determination on remedy and bond when a published version of the Initial Determination issues.