Overreaching Jurisdiction: ITC Judge Says “Sale after Importation” in Section 337 Doesn’t Require Actual Selling
Despite the fact that Section 337 is a trade remedy meant to protect domestic industries from “unfair acts in import trade,” the ITC often adjudicates disputes that have little or nothing to do with trade. This is possible in large part because the agency has expanded its own jurisdiction through broad interpretations of the statutory text.
A recent decision in Intraoral Scanners and Related Hardware and Software (Inv. 1090) gives us a good demonstration of how the Commission and its administrative law judges intentionally and overtly adopt loose interpretations of key provisions in Section 337 to erase limits on their jurisdiction.
For cases involving “articles that infringe a valid and enforceable United States patent,” Section 337 proscribes three specific acts. Known collectively as the “importation” requirement, these acts are (1) “importation into the United States,” (2) “sale for importation,” and (3) “sale within the United States after importation by the owner, importer, or consignee” of the articles. In order to violate Section 337, a respondent must do at least one of those three things.
In Intraoral Scanners, the ALJ found that two of the three respondents in the investigation had never imported or sold the accused products but could still be subject to Section 337 because they were “closely involved in the effort to sell the product.” As explained in the ALJ’s Initial Determination:
In the broadly remedial context of section 337, the dictionary definition of a “sale” does not necessarily limit the Commission’s jurisdiction. . . .
The record reveals no importation or direct sales activities by these respondents, but the evidence does show that [they] participate in selling accused products in the United States. These actions by [respondents] create the nexus between the two companies and the sale of accused products in the United States that is required to satisfy the importation requirement. [emphasis added]
To justify this position—that a statute prohibiting importation and sales can be violated without importing or selling anything—the ALJ explains that the ITC has traditionally adopted a broad interpretation of its authority.
The Commission’s broad interpretation of the activities that can give rise to liability under section 337 has been consistent over many years and comports with the remedial purpose of the statute. Suprema, Inc. v. Intl Trade Comm’n, 796 F.3d 1338, 1352 (Fed. Cir. 2015). The Commission’s authority thus may be extended to parties that do not themselves engage in prohibited acts, but whose activities are so closely entwined with prohibited acts as to bring them within the broad reach of section 337. The Commission’s authority extends, in short, to any case in which “some nexus” is found between the activities of the respondent and a jurisdictional element of section 337(a)(1). Cigarettes, 2009 WL 6751505 at *4. [emphasis added]
Curiously, the Cigarettes case cited in the ALJ’s analysis involved a “sale for importation” offense rather than a “sale within the United States” offense. But unlike the sale-for-importation violation, Section 337’s post-importation sale offense specifically applies only to “the owner, importer, or consignee” of the articles. Nevertheless, the ALJ in Intraoral Scanners dismissed any distinction between the two offenses in a footnote: “It is of no moment that . . . the issue in Cigarettes is importation for sale rather than sale after importation. The principle is the same.”
But the Commission’s opinion in Cigarettes actually makes a big deal out of the distinction, holding that a respondent accused of “sale for importation” need not be an owner, importer, or consignee of the articles, because that “language applie[s] only to sales within the United States after importation.”
One thing the ALJ is certainly right about is that the agency does have a long history of broadly interpreting its powers under Section 337. Indeed, the ITC’s practice of contorting the language of Section 337 to expand the range of activities falling within the agency’s jurisdiction has been been so consistent for so long that not being bound by the definition of the words in the statute seems to have gained a sort of precedential value in the eyes of the Commission and its ALJs.
And this practice of extending the Commission’s reach beyond what the words of the statute actually say has manifested itself in some peculiar ways in past cases. For example, in Digital Models (Inv. 833), the Commission concluded that “‘importation of articles’ should be construed to include electronic transmission of digital data.” That decision was overturned by the Federal Circuit, which noted in ClearCorrect v. ITC, that Congress surely did not intend to bestow upon the trade agency “jurisdiction over all incoming international Internet data transmissions” through a law last amended in 1988.
Although Section 337 prohibits the importation of “articles that infringe” a patent, the ITC decided in Biometric Scanning Devices (Inv. 720) that importing articles that don’t infringe could still violate the law if the articles were later used to infringe in the United States and the respondent induced that infringement by importing the articles. Then in Digital Video Receivers (Inv. 1001), the Commission further tortured the definition of “articles that infringe” by holding that any post-importation inducement could be a Section 337 violation even if the inducing acts had nothing to do with importation.
So according to the ITC’s “broad interpretation of the activities that can give rise to liability under section 337” and the ALJ’s adoption of that policy in Intraoral Scanners, someone can violate a trade statute prohibiting “importation” and “sale” of “articles that infringe a . . . patent” even if they don’t import or sell the products and even if the products don’t infringe any patent.
Motivating the construction of this linguistic funhouse is the ITC’s insistence that expanding the reach of Section 337 promotes the law’s “remedial purpose.” But most patent investigations at the ITC are already redundant duplications of co-pending litigation in federal district court. Expanding the ITC’s jurisdiction simply provides more opportunities for patent owners to bypass federal courts, where they have full access to all the remedies available under the patent law. Adding more duplicative litigation will only exacerbate the numerous problems already caused by having a dual-track patent litigation system that diminishes the role of Article III judges in favor of bureaucrats at a trade agency.