The internet has one less regulator, thanks to a ruling passed down this morning from The US Court of Appeals for the Federal Circuit. According to the decision, the United States International Trade Commission does not have the authority to regulate information on the internet, blocking what many advocates saw as a major threat to the open web.
Thanks to its broad powers, the ITC has become an increasingly popular venue for patent and copyright disputes, but its jurisdiction traditionally only extends to physical goods as they pass over borders. This latest case looked to change that, with potentially profound implications for data as it crosses international borders.
"There is a fundamental difference between electronic transmissions and material things."
The case began with a patent for software that models plastic braces based on a patient's teeth, held by a company called Invisalign. ClearCorrect was a smaller braces company using software that violated that patent — but because it ran the software on servers in Pakistan, it skirted normal legal mechanisms for enforcing software patents. While ClearCorrect itself was based in Texas, doctors could scan a patient's teeth locally, transmit the data to Pakistani partners, and receive back 3D models that could be printed locally.
Invisalign argued that because the 3D models were the product of patent infringement, the ITC had the authority to stop them at the border, the same way it would seize a shipment of counterfeit iPhones. But the models were transmitted as information rather than a tangible product, and stopping them would have required powerful new legal authorities over the fundamental providers of the internet, akin to those proposed by SOPA. In January, documents from the Sony leaks revealed that the MPAA and other industry groups were watching the ruling closely, hoping an ITC victory would give them new powers to go after international content piracy.
"A big win for the open internet"
After today's ruling, there's little chance of that happening. In the ruling, Judge Sharon Prost drew a clear line between physical articles and digital goods, planting the ITC firmly on the physical side. "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,'" Judge Prost wrote, referencing an earlier ruling on Chevron v. NRDC.
"We recognize, of course, that electronic transmissions have some physical properties — for example an electron’s invariant mass is a known quantity — but common sense dictates that there is a fundamental difference between electronic transmissions and 'material things,'" the ruling continues. "Our analysis is therefore complete." In short, you can't use laws over physical exports to manage digital goods: case closed. The ruling isn't a free pass for ClearCorrect, which can still be sued for infringement in federal court, but it means the most severe legal scenarios are no longer as likely.
The ruling has already been applauded open-internet advocacy groups, many of whom filed briefs in the case. "This decision is a big win for the open Internet," said Public Knowledge in a statement. "By rejecting the ITC's attempt to expand its jurisdiction, the Federal Circuit helps to ensure that Internet users have unfettered access to the free flow of information that has proved so useful for innovation and free expression."
The MPAA was less optimistic. "This ruling, if it stands, would appear to reduce the authority of the ITC to address the scourge of overseas web sites that engage in blatant piracy of movies, television programs, music, books, and other copyrighted works," wrote an MPAA representative. "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."
11/10 1:36PM ET Updated to include MPAA comment on the ruling.