MPAA Dealt a Blow in Appellate Ruling Over Importation of Digital Files

The Federal Circuit rules that the ITC exceeded its jurisdiction by blocking the importation of digital files.
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On Tuesday, a federal appeals court issued a landmark decision that holds that the International Trade Commission exceeded its authority by stopping a dental company from importing digital files. The dispute may have been nominally a "case about teeth," as the International Trade Commission put it, but today's decision truly amounts to a huge setback for the Motion Picture Association of America in its ongoing worldwide antipiracy efforts.

The case came to the United States Court of Appeals for the Federal Circuit after the ITC decided to stop ClearCorrect from importing a design for 3D printed invisible braces. The dispute gained a lot of attention because of the prospect that the U.S. government could interfere with data transmissions carried out by Internet service providers.

Google and some consumer advocacy groups expressed worry about "content gatekeepers" while the MPAA and the Recording Industry Association of America filed an amicus brief urging that the ITC should have the ability to address copyright infringement in the digital context.

The big issue in the case was the meaning of "articles" under Section 337 of the Tariff Act of 1930, which gives the ITC authority to step in when it sees unfair practices in import trade. Are "articles" limited to "physical" goods or does it go further? The legislation provided no definition, but the ITC pointed to a few stray cases supporting its interpretation and argued that it was misguided to think that U.S. trade authorities haven't been conferred authority over data transmissions.

The case divided the panel at the Federal Circuit, but the majority opinion offers a rebuke in reversing the ITC's decision.

"The Commission’s decision to expand the scope of its jurisdiction to include electronic transmissions of digital data runs counter to the 'unambiguously expressed intent of Congress,'" writes Circuit Judge Sharon Prost. "Here, it is clear that 'articles' means 'material things,' whether when looking to the literal text or when read in context 'with a view to [the term’s] place in the overall statutory scheme.' We recognize, of course, that electronic transmissions have some physical properties — for example an electron’s invariant mass is a known quantity — but commonsense dictates that there is a fundamental difference between electronic transmissions and 'material things.'"

The opinion (read here) goes on to say that "intangibles" don't pass through U.S. ports, and that the Tariff Act couldn't have contemplated a remedy against them. Prost offers up a long history of how goods have been treated, plus talks about the legislative history of the law itself, in coming to the conclusion that limits "articles" to "material things."

The case was analyzed under Chevron, an important precedent that usually means courts defer to agencies on statutory interpretations of ambiguous language.

A concurring opinion from Circuit Judge Kathleen O'Malley cites laws like the Communications Decency Act that have come since 1930. She states that if Congress wanted to confer the ITC proper jurisdiction over digital files, "it is very unlikely that Congress would have delegated the regulation of the Internet to the Commission, which has no expertise in developing nuanced rules to ensure the Internet remains an open platform for all.

Circuit Judge Pauline Newman writes the dissent and says that the Tariff Act was enacted to protect American industry from unfair competition and that it shouldn't be limited to technologies existing 90 years ago when the law was written. She notes, "The panel majority’s removal of this remedy from a pre-eminent form of today’s technology is a dramatic withdrawal of existing rights, devoid of statutory support and of far-reaching impact."

In a statement, the MPAA had this to say about today's development...

"We are disappointed at the Federal Circuit panel's 2-1 ruling that the International Trade Commission does not have the authority to block the importation of 'articles' that consist of infringing digital transmissions. This ruling, if it stands, would appear to reduce the authority of the ITC to address the scourge of overseas websites that engage in blatant piracy of movies, television programs, music, books and other copyrighted works. As Judge Newman's dissent trenchantly argues, the majority 'ignores precedent and logic, and removes a vast body of technology from the protection of a statute designed for its protection.' We will be watching closely for further proceedings in this case, including potential en banc review, and continue to support the ITC in its efforts to address 21st Century challenges."

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