Trade Courts Update for Week of November 11, 2015

United States Court of International Trade

 

Motion to Dismiss Granted where Basis of Plaintiff’s Claim was Invalid Protest

In Design International Group Ltd. v. United States, Court No. 14-119, Slip Op. 15-126 (November 9, 2015), the court granted defendant’s motion to dismiss because plaintiff’s complaint was based on an invalid protest filed to challenge an already denied protest. This action concerned two entries of pencils, Entry Nos. BKC 0138174-9 and BKC 0138213-5, made at the Port of Los Angeles/Long Beach, where plaintiff was the importer of record for these entries.  On June 7, 2013, U.S. Customs and Border Protection (“Customs”) liquidated both entries. On July 9, 2013, Design’s customs broker filed Protest Nos. 2704-13-101337 and 2704-13-101339, challenging Customs’ calculation of the number of pencils included in each entry and the resulting assessment of duties, and on August 15, 2013, Customs denied both protests.

On October 10, 2013, Design’s counsel filed a third protest, Protest No. 2704-13-102066, which also challenged Customs’ calculation of the number of pencils covered by Entry Nos. BKC 0138174-9 and BKC 0138213-5.  On November 19, 2013, Customs denied Plaintiff’s protest as untimely.  Design insisted that its protest was timely and thereupon filed this court case.

However, under 19 USC §1514(c)(1)(D), an importer is only allowed to file one protest on a given entry, and thus, here, plaintiff invalidly filed the second protest.  No jurisdiction may lie where its basis is an invalid protest. The court stated, “Here, Customs denied Protest Nos. 2704-13-101337 and 2704-13-101339 on August 15, 2013.  Design’s October 10, 2013 protest, Protest No. 2704-13-102066, effectively contested Customs’ denial of its first two protests.  As a result, Design’s October 10, 2013 protest is invalid.”  Thus, the court granted defendant’s motion to dismiss because it did not have jurisdiction to entertain an invalid protest.

 

Third Administrative Review Remanded

In Gang Yan Products, Inc. et al. v. United States, Court No. 14-148, Slip Op. 15-127 (November 9, 2015),  the court considered the third administrative review conducted by the defendant International Trade Administration, U.S. Department of Commerce (“Commerce”) of Diamond Sawblades from the People’s Republic of China (“PRC) (“Third Review”) covering the 2011-2012 period.  As with the two prior administrative reviews, the plaintiffs filed this action to preserve their challenge to the country-wide (or “PRC-wide”) rate applied to them as part of the “ATM entity.”  Because Commerce did not explain why a separate review was not triggered for plaintiffs here, the court remanded the determination.  According to the court, “[T]his matter requires remand for further clarification of why the determination of the ATM entity’s ineligibility for a separate rate did not trigger a similar “review” of the PRC-wide rate, and specifically what Commerce’s policy or practice was at the time, if it was not as described in the decision on the results of redetermination of the first administrative review.”

 

United States Court of Appeals for the Federal Circuit

 

Federal Circuit Reverses ITC Decision Regarding Jurisdiction of Electronic Digital Transmissions

In ClearCorrect Operating, LLC et al. v. United States International Trade Commission and Align Technology, Inc., Court No. 14-1527(November 10, 2015),  the Federal Circuit struck down the International Trade Commission’s (ITC or Commission) decision to expand the scope of its jurisdiction to include electronic digital transmissions of digital data. The Commission instituted the present investigation based on a complaint filed by Align Technology, Inc. (“Align”).  Align alleged a violation of 19 U.S.C. § 1337 (“Section 337”) by reason of infringement of various claims of seven different patents.  The technology at issue in this case relates to the production of orthodontic appliances, also known as aligners.  The aligners in question “are configured to be placed successively on the patient’s teeth and to incrementally reposition the teeth from an initial tooth arrangement, through a plurality of intermediate tooth arrangements, and to a final tooth arrangement.”  ’880 patent (abstract). 

The respondents to the investigation were ClearCorrect Operating, LLC (“ClearCorrect US”), and Clear Correct Pakistan (Private), Ltd. (“ClearCorrect Pakistan”) (collectively “ClearCorrect”).  ClearCorrect is a producer of these aligners.  The parties and the Commission agreed to divide the patent claims into four Groups. However, only Groups I and II were at issue in this appeal; Group I contains those claims that relate to methods of forming dental appliances and Group II contains those claims that relate to methods of producing digital data sets.

The Administrative Law Judge (ALJ) found infringement and determined that the Commission had authority to order ClearCorrect to stop electronically importing digital models into the United States.  The ALJ recommended that the Commission issue a cease and desist order directed to ClearCorrect to prohibit the importation of digital models.  ClearCorrect and Align both filed petitions with the ITC. The ITC terminated the investigation by finding infringement of the two groups. Specifically, the Commission found that ClearCorrect US directly infringed the Group I patents and ClearCorrect Pakistan contributed to that infringement.  The Commission determined that, because ClearCorrect US’s infringement occurred in the United States, it was not a violation of Section 337. However, the ITC then exerted its authority over ClearCorrect Pakistan as a contributory infringer for importing the data models.  Additionally, the Commission found that ClearCorrect Pakistan practiced the Group II method claims in Pakistan and found that the importation of the resulting digital models violated 19 U.S.C. § 1337(a)(1)(B)(ii).  Finally, the Commission agreed with the ALJ that the Commission had jurisdictional authority over electronically imported data under Section 337. The Commission has stayed its cease and desist order until the appeal to the Federal Circuit was resolved.

First, the Federal Circuit found that electronic transmissions are not “articles” under Section 337 of the Tariff Act. “Articles” are defined as “material things” and do not extend to electronic data. Second, the manner in which the term “articles” has been used throughout the statute supports the proposition that it covers only material things.  The Federal Circuit pointed to the forfeiture section in 19 U.S.C. 1337(i), and stated, “if articles included digital data, it would render the section’s use of the terms “forfeited” and “seized” hollow, as an electronic transmission cannot be “seized” or “forfeited.”  By way of example, digital transmissions from satellites do not move through border crossings, nor can they be stopped at our borders via any enforcement mechanism contemplated in the statutory scheme.”  Slip Op., pg.22. Third, the cease and desist power may only apply to material things rather than intangibles, as doing so would extend the scope of the provision. Moreover, the Tariff Schedule applies narrowly and is limited to tangibles. Finally, because the statute is clear, there was no need to confer with legislative history.

For all these reasons, the ITC’s decision was reversed and remanded.