Appeals court considers ITC bid to be Internet cop
The Court of Appeals for the Federal Circuit heard oral arguments this week in what might otherwise be described as an obscure patent case, ClearCorrect v. International Trade Commission. What makes the case noteworthy is the ITC’s unilateral decision – on its own, without guidance from Congress – that it has authority to regulate “electronic transmissions of digital data” over the Internet in the same manner as it does physical goods.
This is a big deal. Until now, the ITC, a relatively minor federal agency, has enforced intellectual property rights largely to block importation of items like knockoff designer handbags and bootleg DVDs. In most instances, these matters are completely actionable in U.S. courts. If it successfully expands its authority to become the new digital cop on the Internet beat, it would subject a broad range of ordinary business activities to new investigations and potentially could resurrect SOPA-style site blocking to censor the Internet.
Indeed, a leaked Motion Picture Association of America memo outlined precisely that strategy, as the ITC offers remedies that are stronger, swifter and more inexpensive than traditional litigation. Rights-holders simply prefer the ITC because it offers them a bigger, blunter cudgel. Which is probably why the MPAA wrote an amicus brief in ClearCorrect arguing how great an idea it was to regulate the Internet at the border.
Fortunately, there has been a good deal of opposition to the ITC’s power grab. In a joint letter with FreedomWorks and the Niskanen Center, R Street argued against expanding ITC authority to include digital transmissions:
Markets for digital goods have thrived for decades without the commission exercising these powers. They represent one of the most vital segments of the U.S. economy. The authority of domestic courts has been more than sufficient to handle disputes over intellectual property rights concerning digital goods. The commission’s entry into this space is a wholly unwelcome and unnecessary government intervention and will only complicate matters concerning digital commerce.
The Cato Institute’s K. William Watson — who earlier wrote a policy paper on ITC’s patent-enforcement powers, arguing that they are altogether “unnecessary, protectionist and inconsistent with U.S. trade obligations” — also weighed in:
[T]he bulk of the ITC’s caseload, including the Align case, involves disputes between parties that can and do sue each other in U.S. courts…Giving the ITC power to bar cross-border data transmissions invites mischievous litigation without serving any legitimate public policy goal.
The ITC’s move has also found strong opposition from other parts of the political spectrum. In April, R Street also joined a letter with more than two dozen organizations and law professors, forming a broad coalition that included the American Civil Liberties Union, Public Knowledge, the Electronic Frontier Foundation, the American Library Association and the Center for Democracy and Technology. In addition, Public Knowledge and the Electronic Frontier Foundation co-authored an amicus brief. And this week, The New York Times editorial board agreed.
So did all of these efforts have an impact in raising alarm bells? Looking to the oral argument, it’s clear the judges are aware of the potential threat. Speaking to the ITC attorney, Chief Judge Sharon Prost said:
In your summary of argument, which is only a page, you make the very salient statement that we shouldn’t lose sight of the fact that this is a case about teeth. Well, Markman was a case about dry cleaning, but no one thinks of Markman as standing for anything about dry cleaning. It stands for an important legal principle, and in my view, so does what the Commission has done here. So I don’t quite understand how you’re trying to cabin what’s going on here.
And just to supplement that, you go on to sort of say, if I’m understanding correctly, that these Internet service providers are all worried, but this isn’t that type of case. And kind of, “Don’t worry, we’ll get that case, and we’ll decide it on the facts and the record before us.” It does seem to me that if we were to affirm the Commission here, we would be saying that the ITC has jurisdiction over electronic transmissions. I don’t see very many limiting principles that would apply to future cases. Do you?
The attorney for ClearCorrect seized the opportunity Prost offered to reiterate the point that the ITC, like other limited-jurisdiction agencies, shouldn’t unilaterally expand their own powers without a mandate from Congress:
Congress has a lot of balls in the air about what we’re going to do about this streaming information. And when it decides these issues…they’re going to have their theories and their evidence and their lobbyists and bills and draft bills, amendments, all that good stuff, to come up with the rule that we can work with, and all live by hopefully.
So the point is well taken that instead of the ITC just unilaterally expanding its own power to try and cope with this brave new world, which I suggest is really no different from the old world, this is a matter that should be left to Congress.
Charles Duan and Foster Dobry have even more analysis of the oral argument over at the Public Knowledge blog.
Meanwhile, the MPAA has characterized the objections as “hyperbole” and “sky is falling” rhetoric. To be fair, they are right that this case “is not about what the remedy should be if unlawful conduct if determined.” Of course it should come as no surprise that they are being disingenuous; as shown by the leaked MPAA memo, getting the ITC to implement site-blocking and undermine the Digital Millennium Copyright Act’s safe-harbor protections has been their plan all along.
For now, we have to wait several months to see what happens. In the event that the court affirms the commission’s position, it will be up to Congress to rein in the ITC’s ill-advised attempt at empire-building.
