Last year, when the Sony emails leaked, and it was revealed that the MPAA was still totally focused on bringing SOPA back through alternative means, one of the strategies explored
was getting the International Trade Commission (the ITC) to set up a sort of secret SOPA. The ITC is an already problematic government agency that is already widely abused
by patent holders. Basically, you can ask the ITC to "block" some sort of "illegal foreign competition." And for patent holders, this has meant going to the ITC and claiming that a foreign firm (or a domestic firm that is importing products) is violating its patents, and thus the ITC should issue an injunction blocking any such products from entering the US at its borders. This is already troublesome in the patent context, because the ITC process is entirely separate from either the USPTO's review of patents or the federal courts -- and actually has different rules. So even if a court might decide that a patent is invalid under existing rules, the ITC may have already started blocking the import of products, claiming patent infringement. It basically allowed patent holders to get two bites at the apple (sometimes, quite literally at Apple).
The MPAA's theory was that if the ITC can block "infringing products" at the border, why can't it basically do the same thing for "infringing content
." The goal of the strategy -- which even the MPAA's legal experts admitted was a long shot -- was to find a key case, in which "digital goods" of some sort went before the ITC, and see if it could get a ruling in its favor. It found that case in the ClearCorrect case, in which the company ClearCorrect faced off against the ITC over its 3D printing of clear plastic braces, custom-designed for each patients' teeth. While another company holds patents on a similar process, ClearCorrect tried to get around this by doing the computer work in Pakistan, and then sending the completed digital model
back to the US to be printed. Thus, ClearCorrect argued, it was not violating the patents in the US and was just getting a digital file. The ITC ruled against ClearCorrect, and the company appealed the ITC's ruling out into the federal court system where the case was heard by the appeals court for the Federal Circuit (CAFC). The MPAA weighed in supporting the ITC, hoping to give teeth to the idea that the ITC can block "digital goods" at the border for "infringement." Thankfully, the good folks at Public Knowledge weighed in on the other side, noting what a massive and dangerous expansion of power this would be for the ITC in a very digital world.
Thankfully, today, the CAFC sided with ClearCorrect and against the ITC (and the MPAA)
, noting that the ITC has no jurisdiction to issue injunctions on digital products. The decision was written by CAFC chief judge, Sharon Prost (who has really shaken up CAFC in a good way since taking over last year). Prost correctly notes that the ITC's original decision was a massive, unauthorized expansion of the ITC's jurisdiction, without the necessary Congressional approval. In short:
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
Prost notes that the ITC's charter allows it to issue injunctions to block the import of "articles" at the border, and "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.'"
The judge notes that, while digital content has some sort of physical aspects, that does not
make it the same thing as physical property:
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.”
Going into more detail, Prost basically just reads the law:
The Commission’s jurisdiction to remedy unfair international
trade practices is limited to “unfair acts” involving
the importation of “articles.” 19 U.S.C. § 1337(a).
Thus, when there is no importation of “articles” there can
be no unfair act, and there is nothing for the Commission
to remedy. Here, the only purported “article” found to
have been imported was digital data that was transferred
electronically, i.e., not digital data on a physical medium
such as a compact disk or thumb drive. The Commission’s
April 3, 2014, majority opinion devotes twenty-one pages
of analysis to the question of whether “articles” encompasses
digital data and ultimately concludes that it does.
But Judge Prost notes that the ITC is just wrong about that. And then starts digging in deeper and deeper about how ridiculous the ITC was in trying to make this massive landgrab. She spends pages citing the dictionary
(actually, multiple dictionaries) as to why the ITC is just wrong. And then moves on to point out that it's pretty clear what Congress meant and the ITC seems to have just decided for itself to try to expand its powers. It's a pretty thorough smackdown. After making it clear that the ITC clearly misread the statute, Prost then goes on (even though she doesn't have to) to smack down the ITC's interpretation as "unreasonable." Again, she returns to the dictionary and notes that it appears the ITC looked at it, and then decided to pretend it said something different.
The Commission’s analysis of dictionary definitions
evidences the irrationality of the Commission’s interpretation
of the term “article.” While the Commission ostensibly
analyzes various dictionary definitions, it fails to
adopt a definition consistent with any of the definitions it
references. For example, as discussed in the prior section,
the Commission turns to the 1924 edition of the Webster’s
dictionary for the definition of “article,” but rather than
adopt that definition it concludes that it will “embrace a
broader meaning that describes something that is traded
in commerce.” ... In other words,
it generates its own definition, unrelated to the definition
provided by the dictionary.
Furthermore, the Commission inexplicably cites to
several dictionaries in two footnotes that support “articles”
being defined as “material things,” but provides no
analysis as to why these dictionaries should not be considered.
Even worse, she notes that the ITC not only misread the legislative history on the Tariff Act, but appears to have simply cut out a key phrase
that undermines its argument. Specifically:
The Commission’s Opinion cites the Senate
Report, S. Rep. 67-595, as authority for this conclusion
and then quotes it as follows:
The provision relating to unfair methods of competition
is broad enough to prevent every type and
form of unfair practice and is, therefore, a more
adequate protection to American industry than
any antidumping statute the country ever had.
However, the actual quote reads as follows:
The provision relating to unfair methods of competition
in the importation of goods is broad
enough to prevent every type and form of unfair
practice and is, therefore, a more adequate protection
to American industry than any antidumping
statute the country ever had.
.... The Commission’s
omission of the phrase, “in the importation of
goods” is highly misleading; not only was a key portion of
the quote omitted, but it was omitted without any indication
that there had been a deletion. Furthermore, while
we may agree that the quote, as incorrectly stated by the
Commission, would indicate a broad authority for the
Commission, the phrase “in the importation of goods”
clearly limits the Commission’s authority. And as we
discussed above, it limits it in such a way as to exclude
non-material things. Because the Commission uses this
misquote as its main evidence that the purpose of the act
was to cover all trade, independent of what form it takes,
the Commission’s conclusion regarding the purpose of the
Act is unreasonable.
Yeah, simply deleting the phrase that undermines your argument, without even putting in some "..." or something is pretty bad.
There's a concurring opinion from Judge Kathleen O'Malley that is also a good read, noting how ridiculous it is that the ITC magically thinks it has the right to regulate pretty much the entire internet, without any actual expertise or mandate from Congress:
The Commission has concluded that it has jurisdiction
over all incoming international Internet data transmissions.
It reaches this conclusion despite never having
purported to regulate Internet transmissions in the past,
despite no reference to data transmissions in the statute
under which it acts, despite an absence of expertise in
dealing with such transmissions, and despite the many
competing policy concerns implicated in any attempt to
regulate Internet transmissions. The Internet is “arguably
the most important innovation in communications in a
generation.”... If Congress intended for the Commission
to regulate one of the most important aspects of modernday
life, Congress surely would have said so expressly.....
Although the Commission’s jurisdiction over imported
physical goods is undeniable, 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.... Instead, the responsibility lies with Congress to decide
how best to address these new developments in technology.....
Indeed, Congress has enacted laws and debated bills
whose intent is to balance an interest in open access to
the Internet and the need to regulate potential abusers.... Not once in
these debates has Congress said or implied that it need
not concern itself with these issues because it had already
delegated the authority to do so to the Commission.
Good stuff. O'Malley is actually arguing that the majority decision doesn't even need to go through the whole "Chevron" test it does, about interpreting the law because it's so blatantly obvious that the ITC has no authority here, but if it must go through with that interpretation test, then she agrees with Judge Prost that the ITC is just wrong.
There is a dissent, from Judge Pauline Newman who basically says "well, the ITC regulates international commerce, and commerce today is digital, so it's all good."
The purpose of Section 337 to provide a facilitated
remedy against infringing imports is beyond dispute. The
panel majority’s removal of this remedy from a preeminent
form of today’s technology is a dramatic withdrawal
of existing rights, devoid of statutory support and
of far-reaching impact. The majority’s ruling, that digital
goods cannot be excluded under Section 337 because
digital goods are “intangible,” is incorrect.
Given all that, don't be surprised to see an attempt to appeal this to the Supreme Court (or en banc for CAFC). But, at least for now this is a good and important decision that wipes out one of the MPAA's secret plans to bring SOPA in through the back door. Kudos to Public Knowledge for focusing in on this case and making the case for keeping the internet open.