[00:00:00] Speaker 06:
This is 141527, clear, correct, operating versus ITC.

[00:00:05] Speaker 06:
Mr. Myers, whenever you're ready.

[00:00:08] Speaker 02:
May it please the Court?

[00:00:10] Speaker 02:
Transmissions of electronic information into the United States are nothing new.

[00:00:15] Speaker 02:
Four decades before the tariff act that we're here talking about today was enacted.

[00:00:20] Speaker 02:
The US Supreme Court in Western Union versus Pendleton was deciding cases about the transmission of electronic information into the United States by wire, concluding that that was commerce, but also concluding that it was a very different kind of commerce from the trade in tangible goods

[00:00:41] Speaker 02:
And that one set of regulations... Well, let me ask you, firstly, just a couple questions.

[00:00:44] Speaker 06:
When you say intangible goods, now the parties in their briefs are putting some adjective before every term.

[00:00:50] Speaker 06:
Is it your view that goods is broad enough to cover tangible and intangible goods?

[00:00:55] Speaker 02:
No, Your Honor.

[00:00:56] Speaker 02:
If I did, I misspoke.

[00:00:58] Speaker 02:
My point was that when the court was talking about two sets of regulations,

[00:01:04] Speaker 02:
One was for the trade in goods, including commodities, and the other was for this electronic transmission of information.

[00:01:12] Speaker 06:
Well, why isn't the electronic data here simply a type of product?

[00:01:16] Speaker 06:
And if so, why ought not the Commission have the authority to decide that that too should be covered under its jurisdiction?

[00:01:25] Speaker 02:
Good question, Your Honor.

[00:01:26] Speaker 02:
Several reasons.

[00:01:28] Speaker 02:
The transmission of information is not a product.

[00:01:32] Speaker 02:
And the authority over the transmission of electronic data was never authority granted to the Tariff Commission or the ITC by Congress.

[00:01:43] Speaker 02:
After the Supreme Court decided that these were two different forms of commerce, with that backdrop, Congress passed the Tariff Act.

[00:01:53] Speaker 02:
But when it did so, it did not give authority

[00:01:56] Speaker 02:
over electronic transmissions of information to the Old Tariff Commission.

[00:02:02] Speaker 02:
Instead, what it did is almost immediately pass the Communications Act, create the FCC, and give it centralized authority over all transmissions of information into the U.S.

[00:02:14] Speaker 04:
But by information, you're including, you're going beyond knowledge, right?

[00:02:20] Speaker 04:
You're saying information is embodied in some sort of digital electronic

[00:02:26] Speaker 04:
uh... medium not drawing a distinction between pure knowledge and embodiment of that knowledge, is that right?

[00:02:37] Speaker 02:
That is correct.

[00:02:38] Speaker 04:
I'm talking about... But you keep talking about transmitting information, transmitting knowledge.

[00:02:46] Speaker 02:
Yes, Your Honor.

[00:02:47] Speaker 02:
What I'm talking about, the electronic transmission of information would be... The electronic transmission?

[00:02:52] Speaker 02:
Electronic signals over wire.

[00:02:54] Speaker 04:
That's quite different, is it not?

[00:02:56] Speaker 04:
There isn't a distinction that I would think you would like to draw to support your theory.

[00:03:04] Speaker 02:
Your Honor, we may be misunderstanding each other.

[00:03:08] Speaker 04:
I'm trying to understand what you mean when you talk about transmitting information.

[00:03:13] Speaker 02:
What I'm talking about transmitting information would be, for example, all of the media whose authority was granted to the FCC.

[00:03:24] Speaker 02:
Wire transmissions of electronic data, radio waves, telephone signals, now television signals and satellite broadcasts.

[00:03:35] Speaker 02:
Those would be the transmissions of electronic information.

[00:03:38] Speaker 02:
that the Congress gave to the FCC instead of the ITC.

[00:03:44] Speaker 05:
Well, the ITC's argument here is, as I understand it, that you're viewing this too broadly.

[00:03:51] Speaker 05:
That in this particular case, what they said was this particular type of data transmission that's at issue, not all data transmission.

[00:03:59] Speaker 05:
And that here, you have a data transmission that is capable of being immediately downloaded into something that becomes physical.

[00:04:09] Speaker 02:
Well, Your Honor, that may be true, but the distinction is still there.

[00:04:14] Speaker 02:
This is the transmission of electronic data.

[00:04:17] Speaker 02:
And while they say this can be crystallized into a product in short order, now so can many things.

[00:04:25] Speaker 02:
This transmission of information is no different than a telephone call, television signal, radio wave.

[00:04:31] Speaker 02:
Morse code, it's the same thing.

[00:04:33] Speaker 02:
It is an electronic surge across a wire.

[00:04:36] Speaker 02:
That's all it is.

[00:04:37] Speaker 02:
The character of the transmissions have not changed since the mid-1800s, maybe the quantity of data has, but the character of these transmissions is no different, and Congress never gave the Tariff Commission or the ITC authority to regulate them.

[00:04:53] Speaker 02:
And in the eight and a half plus decades since the time this tariff act was passed,

[00:05:00] Speaker 02:
No court has held, no agency has held, and no one has ever even really argued until just now in this case that the transmission of an electronic signal streaming information would qualify as an imported article under the Tariff Act.

[00:05:15] Speaker 06:
In Suprema recently issued, the court concluded that a lot of deference would be owed the ITC with regard to matters involving the statute.

[00:05:25] Speaker 06:
Why doesn't that carry over to this case in terms of the deference you would apply to their definition of articles?

[00:05:31] Speaker 02:
Because the deference would only come into play if the Commission had been granted the congressional nod of authority over the subject matter.

[00:05:39] Speaker 02:
Once Congress hands over the authority, then we would let the Commission regulate it.

[00:05:45] Speaker 02:
But that never happened here.

[00:05:47] Speaker 06:
The IPC and the Old Territory... But what would Congress have had to say to give them the authority?

[00:05:53] Speaker 06:
What would have had to say, and the IPC has the authority to regulate electronic commissions?

[00:05:58] Speaker 06:
What would Congress have had to say in order for us to conclude that they have the authority?

[00:06:02] Speaker 02:
Well, Your Honor, assuming that Congress understood the Western Union versus Pendleton case, where the Supreme Court called this commerce, I would say commerce.

[00:06:13] Speaker 02:
And to be specific, in accord with that opinion, it would have said commerce both for electronic data transmissions or intangible signals or waves or wire transmissions.

[00:06:23] Speaker 02:
Whatever the court was talking about in the Pendleton case would be the same there.

[00:06:27] Speaker 02:
But Congress didn't do that.

[00:06:29] Speaker 02:
Congress did not say commerce, as the Supreme Court has described.

[00:06:34] Speaker 02:
It chose articles.

[00:06:36] Speaker 02:
And then it turned around and immediately gave all the data transmissions to the FCC.

[00:06:43] Speaker 02:
So just you and I having this conversation, I would say if they wanted to make that clear, they would have just used commerce instead of article, something that denotes tangibility.

[00:06:54] Speaker 02:
Even the commission is going to stand up here in a minute and say, if we look at the contemporaneous dictionary definitions from the early 20th century, we can look at the word article.

[00:07:05] Speaker 02:
And we can take these transmissions, streaming transmissions of information, and we can stuff it into what I think they call the outer bounds.

[00:07:14] Speaker 02:
of the dictionary definition.

[00:07:16] Speaker 02:
But when we look at those same dictionaries, they always refer to tangible items when wanting to make a specific description of ours.

[00:07:22] Speaker 06:
Yeah, but the world is changing more rapidly than we ever would have thought.

[00:07:26] Speaker 06:
And they passed the patent act in 1952.

[00:07:28] Speaker 06:
No, Congress didn't have in mind stem cells and nanotechnology.

[00:07:35] Speaker 06:
But we've morphed.

[00:07:36] Speaker 06:
I mean, we've said we have authority, and therefore we're going to adjudicate those cases, notwithstanding that clearly in 1952, Congress had never contemplated that.

[00:07:45] Speaker 06:
Why is this situation different than that in terms of the ITC's authority?

[00:07:49] Speaker 02:
Because Congress did contemplate it.

[00:07:51] Speaker 02:
Like I said, there's nothing new.

[00:07:53] Speaker 02:
The wire transmissions, these internet transmissions, those are just pulses of data over wire, exactly like the Morse code in the telegraph machine.

[00:08:03] Speaker 02:
Again, the quantity of data may have changed, but the character of the transmission has not.

[00:08:07] Speaker 02:
Even beyond that, by the time this tariff act was passed,

[00:08:11] Speaker 02:
And certainly by the time the FCC or the Communications Act was passed, we not only had the wire transmission, but radio and telephone, with television soon to follow.

[00:08:23] Speaker 02:
Now, on top of all this, Your Honor, we know that what the Commission is trying to do here, taking an ancient dictionary and trying to stuff a definition into articles,

[00:08:40] Speaker 02:
that are important is not the proper way to approach this statutory interpretation.

[00:08:46] Speaker 02:
What we know from Yates versus US is that we have to look at it, we have to look at a reasonable definition of the term in the context of the statute.

[00:08:57] Speaker 04:
So to agree with you, we would have to agree that subject matter that is subject to patenting or copyright nonetheless is excluded from

[00:09:08] Speaker 04:
the general allocation of authority to the Commission with respect to patents or copyright.

[00:09:15] Speaker 04:
Is that right?

[00:09:16] Speaker 02:
Yes, Your Honor, if there is no importation of an article.

[00:09:20] Speaker 02:
That is correct.

[00:09:23] Speaker 04:
So that the remedy, you're not saying that there is no remedy, but the remedy is only in the district courts, not by way of importation?

[00:09:33] Speaker 02:
Correct, Your Honor.

[00:09:34] Speaker 02:
And this case is a perfect example of that.

[00:09:36] Speaker 02:
A line's going to get its day in court.

[00:09:38] Speaker 02:
It's going to get two.

[00:09:39] Speaker 02:
It's sued clear correct in a Texas U.S.

[00:09:42] Speaker 02:
District Court alleging 400 plus infringements of patent claims.

[00:09:48] Speaker 04:
And so in the statute, we must read an exclusion into the broader language of the statute, the IPC statute.

[00:09:57] Speaker 02:
Your Honor, I don't read it as an exclusion.

[00:09:58] Speaker 02:
I read it as

[00:10:00] Speaker 02:
your ticket to get into the ITC, you have to have the importation of an article before they should be able to hear your case.

[00:10:06] Speaker 02:
And here there wasn't one.

[00:10:08] Speaker 02:
There was a stream of data from a domestic server, from a foreign server to a domestic one.

[00:10:14] Speaker 04:
Well, let's say that we view data as an article of commerce without trying to get into a finer definition than that.

[00:10:25] Speaker 04:
Again, going back, as the chief suggested, to the time when articles

[00:10:29] Speaker 04:
had no exclusion.

[00:10:31] Speaker 04:
Where does that take us in your reasoning?

[00:10:35] Speaker 02:
Your Honor, I don't think it takes us anywhere any different from where we've been for the last eight and a half decades.

[00:10:42] Speaker 02:
The statute is clear.

[00:10:46] Speaker 02:
It's not ambiguous.

[00:10:46] Speaker 02:
We're not arguing it's ambiguous.

[00:10:48] Speaker 02:
They're not arguing it's ambiguous.

[00:10:50] Speaker 02:
Articles in the context of this statute means something that can be intercepted at the customs house, stamped with the trademark, broken in transit, put on a rail car.

[00:10:59] Speaker 02:
That's all out of the legislative history that this court reviewed in Bayer AG versus housing.

[00:11:05] Speaker 02:
And while we disagree on the holding of that case, what's indisputable is that this court held that articles in 271 are the same articles in 1337, and they were never intended to reach information.

[00:11:19] Speaker 05:
You both argue that we never get past Chevron step one.

[00:11:22] Speaker 05:
So you both say it's unambiguous.

[00:11:25] Speaker 05:
And so we could obviously fall down on either side of that fetus.

[00:11:30] Speaker 05:
So assuming we disagree with you, what is your best argument otherwise with respect to your direct appeal?

[00:11:37] Speaker 02:
OK, so we do step Chevron one.

[00:11:40] Speaker 02:
We've got an ambiguity.

[00:11:41] Speaker 02:
Chevron two, reasonableness.

[00:11:43] Speaker 02:
Not reasonable here.

[00:11:45] Speaker 02:
Very clear deviation from congressional intent.

[00:11:48] Speaker 05:
uh... you know what if we find that they get that and we're going to go forward and what is your back with respect to the other aspects of european

[00:12:00] Speaker 02:
Oh, I'm sorry, Your Honor, I misunderstood.

[00:12:02] Speaker 02:
We have three.

[00:12:05] Speaker 02:
Based on the time allocation, the commission erred on the contributory infringement finding that the patent claims were invalid and that there was a 2011 covenant not to sue that has the same

[00:12:23] Speaker 02:
specification and disclosure as one of their assertive patents, and because the claims here are so mind-numbingly similar, it should expand to that.

[00:12:33] Speaker 02:
I only have two minutes and 45 seconds left, so why don't I take on Contrib for just a second.

[00:12:44] Speaker 02:
There was a finding by the ALJ of no intent to cause a direct infringement.

[00:12:50] Speaker 02:
That can't coexist with a contributory infringement finding.

[00:12:53] Speaker 02:
They rely on a presumption.

[00:12:55] Speaker 02:
The evidence the ALJ found should have nullified the presumption.

[00:12:59] Speaker 02:
If we call, the commission notes well in bold and italics, italicized letters, that these are just instructions on how to make a physical model that then makes the aligner.

[00:13:12] Speaker 02:
And they have no separate commercial value.

[00:13:14] Speaker 02:
Instructions typically are induced infringement under a 271B, and if we say they're now a contributory under 271C, then 271B becomes surplus, and that violates candidate construction.

[00:13:28] Speaker 02:
The substantial non-infringing uses, here there were several identified in the brief, and finally... Those were all hypothetical, weren't they?

[00:13:37] Speaker 05:
No, Your Honor, like the doctors... Were there actual evidence that they've ever been used in those non-infringing ways?

[00:13:42] Speaker 02:
Yes, Your Honor, there were.

[00:13:43] Speaker 02:
Like the doctors would look at the... you have a scan of the crooked teeth, and then you come up with the straight teeth.

[00:13:51] Speaker 02:
And the doctors have to approve that prescription.

[00:13:54] Speaker 02:
And that's what they were doing with this.

[00:13:56] Speaker 02:
As well as the other uses of just these models, they weren't hypothetical.

[00:14:00] Speaker 02:
They were the same

[00:14:02] Speaker 02:
Models that align was found to infringe on Ormco's patents.

[00:14:06] Speaker 02:
It's just taking digital models of people's teeth and use them to make aligners.

[00:14:10] Speaker 02:
It's a very simple process.

[00:14:12] Speaker 02:
And then finally, we know out of 271C, you have to have a material, and we know from this court's ruling in pharma stem, you have to have a product.

[00:14:22] Speaker 02:
These terms denote making something, making something tangible.

[00:14:27] Speaker 02:
So when you stretch on articles, you're also stretching on material and product.

[00:14:32] Speaker 02:
Because the material and the product are not a service.

[00:14:37] Speaker 02:
They're something you use to make something else.

[00:14:40] Speaker 02:
And I have 30 minutes of control.

[00:14:42] Speaker 06:
You're about up.

[00:14:44] Speaker 06:
We have 43 minutes of your time.

[00:14:46] Speaker 02:
Thank you, Your Honor.

[00:14:46] Speaker 06:
Let's hear from the other side.

[00:14:48] Speaker 06:
You're splitting your argument.

[00:14:49] Speaker 06:
Mr. Rosenstock, you're first.

[00:14:52] Speaker 03:
Thank you very much for rescheduling the argument.

[00:14:55] Speaker 03:
I want to follow up with just a couple of points in response to the appellant here.

[00:15:01] Speaker 03:
This argument about the FCC is a complete red herring.

[00:15:04] Speaker 06:
Well, can I stop you there?

[00:15:06] Speaker 06:
Sure.

[00:15:06] Speaker 06:
I'd rather start, which is in your summary of argument, which is only a page or a little more than a page, you make the very salient statement that we shouldn't lose sight of the fact that this is a case about teeth.

[00:15:21] Speaker 06:
Well, Markman was a case about dry cleaning.

[00:15:25] Speaker 06:
But nobody thinks of Markman as standing for anything about dry cleaning.

[00:15:29] Speaker 06:
It stands for an important legal principle.

[00:15:31] Speaker 06:
And in my view, so does what the Commission has done here.

[00:15:35] Speaker 06:
So I don't quite understand how you're trying to cabin what's going on here.

[00:15:40] Speaker 06:
And just to supplement that, you go on to sort of say, if I'm understanding correctly, that the internet service providers are all worried, but this isn't that type of case.

[00:15:51] Speaker 06:
and kind of, don't worry, we'll get that case and we'll decide it on the facts and the record before us.

[00:15:57] Speaker 06:
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 transmission.

[00:16:09] Speaker 06:
I don't see very many limiting principles there that might apply to future cases, do you?

[00:16:14] Speaker 03:
I do.

[00:16:16] Speaker 03:
The reason why we say it's about teeth is because what was imported here were the data sets that previously had been imported as the physical models, clear correct to evade a consent order that it agreed to, chose to... There's cases about whether or not the ITC has jurisdiction over electronic transmission.

[00:16:33] Speaker 03:
Over electronic transmissions that represent digital goods.

[00:16:36] Speaker 03:
And that's what's going on here.

[00:16:39] Speaker 05:
So how do we draw that line?

[00:16:41] Speaker 05:
How do we know that that electronic transmission represents such digital goods?

[00:16:45] Speaker 03:
Well, the Commission here found that these were items that were bought and sold in commerce exactly the same way that their physical counterparts were.

[00:16:53] Speaker 03:
Indeed, exactly the same way that the exact physical counterparts were in the previous investigation.

[00:16:58] Speaker 03:
In addition, we have cases like Eurodiff.

[00:17:02] Speaker 03:
in which the Supreme Court has instructed that case involved merchandise for anti-dupping and countervailing duties.

[00:17:08] Speaker 05:
So your view is anything that was thought or sold in cash?

[00:17:12] Speaker 03:
Well, our brief disclaims coverage over services, but anything that's a digital good.

[00:17:18] Speaker 03:
Digital goods exist.

[00:17:19] Speaker 03:
It's a term that's used commonly now in the international trade.

[00:17:23] Speaker 03:
Our brief discusses are free trade agreements with Australia, FRIA.

[00:17:28] Speaker 03:
There are a dozen others that talk about e-commerce.

[00:17:31] Speaker 05:
Other than just services, what would be excluded then under your theory?

[00:17:36] Speaker 03:
It would be digital goods.

[00:17:38] Speaker 03:
Now, there is a limiting factor in response.

[00:17:41] Speaker 05:
So you're saying digital goods would not be excluded.

[00:17:43] Speaker 05:
So what would be excluded?

[00:17:45] Speaker 03:
Digital services, phone calls.

[00:17:47] Speaker 03:
If I call up someone, that's not something that's bought and sold in commerce.

[00:17:52] Speaker 03:
That's not an item of commerce, as the commission found on page.

[00:17:55] Speaker 05:
But anything that would be data streamed, for instance, that would be bought and sold in commerce, right?

[00:18:00] Speaker 03:
Well, it might or might not be.

[00:18:02] Speaker 03:
It depends on the nature of it.

[00:18:04] Speaker 03:
I'm not here to tell you exactly where the line is between goods and services.

[00:18:09] Speaker 03:
Thinking about Eurodiff, in which Justice Souter for the Court explained that taking my dry cleaning to a cleaner would certainly be a service.

[00:18:19] Speaker 03:
One can imagine digital services that are the same way.

[00:18:22] Speaker 03:
Strong arguments can be made that if I'm relying on cloud storage for people to

[00:18:26] Speaker 03:
hold my files for me, and then I retrieve those same files later on.

[00:18:31] Speaker 03:
Well, that looks an awful lot like the services that were discussed by the Supreme Court in Eurodiv.

[00:18:37] Speaker 03:
Besides the fact that we have digital goods here as a limitation, we also have all the limitations of substantive law here with regard to the ISPs, if the ISPs are what you're concerned about.

[00:18:49] Speaker 03:
In a future case, the Commission applies all of the defenses, legal and equitable.

[00:18:54] Speaker 03:
The Commission would apply the DMCA safe harbors to the extent that ISPs are immune.

[00:19:01] Speaker 03:
from liability in the district courts, they would be immune from liability in the commission.

[00:19:09] Speaker 06:
Can I take it back to the question we were discussing with your friend about the definition of articles?

[00:19:15] Speaker 06:
And in the commission's opinion, and I think this appears at page 39, which is 199.43 in the appendix, I guess I'm a little confused.

[00:19:32] Speaker 06:
The commission in its discussion of this says it concludes the plain meaning embraces, quote, a broader meaning that describes something that is traded in commerce, end quote.

[00:19:43] Speaker 06:
But the dictionaries, the multiple dictionaries that are cited in the footnote and otherwise,

[00:19:49] Speaker 06:
seen largely to define articles as material things.

[00:19:53] Speaker 06:
So to me, when I'm reading this, there's a disconnect between the definition the commission comes up with and the references they cite in dictionaries to support it, particularly in the footnote.

[00:20:04] Speaker 06:
Do you understand what I'm saying?

[00:20:06] Speaker 03:
I think I do.

[00:20:07] Speaker 03:
First of all,

[00:20:11] Speaker 03:
What I believe to be the leading dictionary, which is Webster's first new international dictionary, which dates from... Is that one that's cited in the text on 39?

[00:20:22] Speaker 03:
It's the right time.

[00:20:24] Speaker 03:
It's a leading dictionary.

[00:20:26] Speaker 03:
It's been relied upon by this court.

[00:20:28] Speaker 03:
countless decisions, including Bayer, NSK, Design, Prinko, NTP, Enercon.

[00:20:35] Speaker 03:
And the definition of article was used by this court's predecessor in Aymar versus Ahmed, as cited in our brief.

[00:20:41] Speaker 03:
That definition is broad.

[00:20:43] Speaker 03:
There's no argument that that definition is narrow so as to encompass only tangible things.

[00:20:49] Speaker 03:
Now, I'm aware of a dissent yesterday by this court that looked to a 1980s dictionary for article and found a narrow definition.

[00:20:57] Speaker 03:
in Black's law dictionary.

[00:20:59] Speaker 03:
For purposes of this case, I don't think that's the right timeframe.

[00:21:02] Speaker 03:
But even if we assume that there are different dictionary definitions, that's just a question of Chevron.

[00:21:07] Speaker 03:
This is the commission interpreting its organic statute through the process of formal adjudication.

[00:21:12] Speaker 05:
How does the commission ever enforce this kind of order when it's supposed to be enforcing these custom-based set of orders?

[00:21:21] Speaker 03:
I disagree with the premise that everything that the Commission does is and should be enforced by Customs at the border.

[00:21:29] Speaker 03:
Cease and desist orders are not enforced by Customs.

[00:21:31] Speaker 03:
They've never been enforced by Customs.

[00:21:33] Speaker 03:
The way that cease and desist orders work is if we have a violation proceeding, such as here, and a cease and desist order issues, the complainant, if it discovers that the respondent, the adjudicated infringer, is violating the cease and desist order,

[00:21:49] Speaker 03:
It institutes an enforcement proceeding at the commission.

[00:21:52] Speaker 03:
And the result of that is that the commission itself, or through efforts with the Department of Justice, the assistant US attorneys in whatever judicial district the respondent has its assets or presence.

[00:22:03] Speaker 05:
But aren't the station assist orders supposed to be supplements to an exclusion order, not substitutes for an exclusion order?

[00:22:10] Speaker 03:
No, I mean what we know from 1974 is that Congress said that the cease and desist order is when it's so extreme or inappropriate that it's likely to result in a fine day of no violation.

[00:22:22] Speaker 06:
But I think Judge O'Malley's point to be one with which I agree, which is they're not supposed to be a filler because

[00:22:31] Speaker 06:
exclusion orders wouldn't possibly work or be able to be effective.

[00:22:35] Speaker 06:
They were supposed to be a supplement.

[00:22:36] Speaker 06:
I think looking at the legislative history, they thought exclusion orders were just too severe in some circumstances.

[00:22:42] Speaker 06:
And that was leading the ITC to not do anything.

[00:22:47] Speaker 06:
So they said, OK, when exclusion orders might be too severe, we're going to allow for cease and desist.

[00:22:54] Speaker 06:
assumes that exclusion orders would otherwise be applicable, it's just we don't think they should be introduced here.

[00:23:01] Speaker 06:
Not, as you say, that when exclusion orders can't possibly be effectuated, that's when we go to cease and desist order.

[00:23:08] Speaker 03:
I have two responses to that.

[00:23:09] Speaker 03:
First of all is we're interpreting the agency statute.

[00:23:13] Speaker 03:
Respectfully, I think that a lot is being read into

[00:23:16] Speaker 03:
a few sentences of legislative history in 1974 that could be fairly read the other way.

[00:23:22] Speaker 03:
And that's the agency's prerogative with its organic statute.

[00:23:25] Speaker 03:
Secondly, there are plenty of circumstances in which a tangible item would have problems with an exclusion order.

[00:23:30] Speaker 03:
Think about when these statutes were enacted.

[00:23:33] Speaker 03:
In 1922 and 1920, and 1930, it was the height of prohibition.

[00:23:37] Speaker 03:
I mean, those were not... Lickers coming in weren't something that was going to be subject to

[00:23:42] Speaker 03:
effective customs enforcement.

[00:23:44] Speaker 03:
Also, as we discussed in our brief... Why not?

[00:23:46] Speaker 03:
Well, because the customs agents work at the ports, and if you have people bypassing the ports, then there's essentially no relief.

[00:23:54] Speaker 03:
In addition, commission remedial orders are prospective.

[00:23:58] Speaker 03:
So what happens when, and this is discussed in our brief, what happens when you have a respondent who tries cramming its merchandise into the US ahead of the issuance of remedial orders?

[00:24:08] Speaker 03:
Cease and desist orders work for that purpose too and a respondent under those circumstances would be far more burdened by a cease and desist order than by an exclusion order.

[00:24:20] Speaker 06:
Can I ask you about one other matter before you sit down and I think you probably already know this because it was highlighted at least in a recent Law Review article which you may or may not be familiar with.

[00:24:30] Speaker 06:
But the point I'm making is if you go back, the commission cited a provision of the legislative history found in the Senate report.

[00:24:39] Speaker 06:
And you repeated it, I think, in your brief.

[00:24:41] Speaker 06:
But the commission relied on it pretty heavily in its opinion.

[00:24:45] Speaker 06:
Well, it turns out that when you look back to the source of that Senate report, the words in the importation of goods has been deleted from the quote that's been found in the commission report.

[00:24:59] Speaker 06:
Are you aware of what I'm talking about?

[00:25:01] Speaker 06:
Have you discovered this?

[00:25:02] Speaker 06:
I'm not telling you this for the first time.

[00:25:05] Speaker 06:
Well, I don't think this is a mistake because I'm looking at the copy of the Senate report that was in our library.

[00:25:12] Speaker 06:
And the quote that the Commission used deletes the word importation of goods from the quote without an ellipsis.

[00:25:21] Speaker 03:
I apologize for that error.

[00:25:24] Speaker 03:
I'm accountable for what the brief says.

[00:25:27] Speaker 06:
The commission's opinion in this case relied on that quote without the term goods extracted without an ellipsis or anything, right?

[00:25:41] Speaker 03:
Well, I'll apologize for the commission then, but that certainly wasn't the commission's intent here because... No, believe me, I'm not trying to prescribe intent.

[00:25:48] Speaker 06:
My question really is, now that we all know what the real quote is,

[00:25:53] Speaker 06:
Don't you think there's a difference between the quotation if you insert the phrase of goods in the quotation?

[00:26:00] Speaker 03:
Well, absolutely not.

[00:26:01] Speaker 03:
I'm sorry to step on the end of the sentence, but absolutely not because the definition of goods from the relevant time frame is just as broad as the definition of articles.

[00:26:08] Speaker 05:
Well, if you weren't afraid of that phrase, why did it get?

[00:26:11] Speaker 03:
I was not working on the case at that point.

[00:26:15] Speaker 03:
I can't imagine why that is.

[00:26:18] Speaker 03:
I can apologize on behalf of the Commission, but there was no ill intent with that.

[00:26:23] Speaker 03:
But goods were defined broadly in 1922 and 1930.

[00:26:27] Speaker 03:
We know that the original version of the Act in 1922 used the word merchandise.

[00:26:32] Speaker 03:
We know that the Senate report referred to goods.

[00:26:34] Speaker 03:
And we know that the final version is enacted in 1922, included articles.

[00:26:39] Speaker 03:
Contemporaneous dictionary definitions at the time were all broad enough to include what had become to be known as digital goods.

[00:26:47] Speaker 03:
I note that the court yesterday inflated the terms goods and articles repeatedly.

[00:26:56] Speaker 03:
And that's consistent with our position here as discussed at pages A199.44 where the commission explains that its definition is such items as are bought and sold in trade at page A199.48 where the commission itself acknowledges that the terms were used interchangeably at the time.

[00:27:17] Speaker 05:
There was nothing in yesterday's opinion that interpreted the term articles.

[00:27:21] Speaker 05:
Yesterday's opinion that

[00:27:22] Speaker 05:
It assumed that articles was a tangible item and then interpreted the word set in French.

[00:27:29] Speaker 03:
Correct?

[00:27:30] Speaker 03:
That is true.

[00:27:30] Speaker 03:
What yesterday's opinion also did, and I'm not suggesting that it's outcome-determinative here by any means, is that the court there replaced reference to the word articles repeatedly with goods.

[00:27:42] Speaker 05:
But that wasn't an issue in the case.

[00:27:46] Speaker 03:
That's correct.

[00:27:47] Speaker 03:
As I said, it's not outcome-determinative here.

[00:27:49] Speaker 03:
I'm just pointing out that the court there treated these the same in the same way.

[00:27:54] Speaker 03:
I think that the chief judge reading the Senate report would treat articles and goods the same.

[00:27:59] Speaker 03:
And all of those terms are broad enough at the time to encompass what have become to be known as digital goods or for purposes of trade promotion authority and electronically delivered goods.

[00:28:11] Speaker 04:
But how does that fit with your opponent's comment that when you start to talk about the kind of information or technology that's here imported, there is another agency, another federal agency that is charged with overview of competitive practices?

[00:28:31] Speaker 03:
Well, the FCC has no such authority.

[00:28:34] Speaker 03:
No such authority has been pointed to us.

[00:28:36] Speaker 03:
The agency that actually exercises that authority is the FTC, and it does so based on its 1914 organic statute, and that's discussed in our brief.

[00:28:46] Speaker 03:
Regardless whether you're dealing with the FTC, which is before the Communications Commission was created,

[00:28:53] Speaker 03:
Or the SEC, which again is an early act.

[00:28:56] Speaker 03:
We don't have people yelling and waving slips of paper in the air to trade stocks anymore.

[00:29:03] Speaker 03:
The nature of those agencies is that their organic statutes are broad enough to encompass trade in its various forms.

[00:29:12] Speaker 03:
And that's our position here with respect to articles and digital goods.

[00:29:16] Speaker 03:
Thank you.

[00:29:17] Speaker 06:
We're way over Mr. Cunard.

[00:29:21] Speaker 06:
We're going to give you your time, but if you'd like to yield some of it back, we'd have no problem with that either.

[00:29:36] Speaker 01:
May it please the Court.

[00:29:38] Speaker 01:
I'd like to address first the contention that there's a categorical exclusion of information products in the term articles.

[00:29:46] Speaker 01:
The Supreme Court has held that articles of trade are not limited to physical articles and specifically that they may be information products.

[00:29:54] Speaker 05:
Isn't it telling though that Congress has been grappling for several years about how best to deal with the

[00:30:03] Speaker 05:
to deal with any kind of governing of this trading of information on the internet, and especially as it relates to copyrighted materials, and has yet been able to really come up with the proper solution because there's so many issues to balance.

[00:30:18] Speaker 05:
Doesn't that tell you that Congress believes that it's its role, not the ITC's role, to draw those balances?

[00:30:25] Speaker 01:
I don't think that you can deduce that there is no authority at all to many of those proposed legislations.

[00:30:30] Speaker 01:
created far broader authority, addressed the financial institutions and carriers and the like.

[00:30:36] Speaker 05:
It didn't propose any authority in the ITC on that.

[00:30:40] Speaker 01:
I think the international trade, if I remember correctly, and I'm not positive of this, but I think there was a role for the IPC in some of the legislation.

[00:30:50] Speaker 01:
But I think it's also important to know that ISPs, like telegraph companies, are carriers.

[00:30:57] Speaker 01:
They're not importers.

[00:30:58] Speaker 01:
They're not subject to the jurisdiction of the act.

[00:31:01] Speaker 01:
They don't trade digital articles.

[00:31:03] Speaker 01:
So there is a very, I think, distinctive test

[00:31:06] Speaker 01:
that can be applied to it.

[00:31:07] Speaker 01:
You must have a discrete item of trade, there must be importation, and there must be importation by the owner, consignee, or importer, and that's going to exclude carriers.

[00:31:17] Speaker 01:
That's why shipping companies, railroad companies, trucking companies are not subject to the IPC's jurisdiction in their role as carriers.

[00:31:26] Speaker 01:
So that's very important to maintain, and you asked about forms like streaming.

[00:31:31] Speaker 01:
Streaming may or may not, depends what it is.

[00:31:34] Speaker 01:
For example, in copyright, broadcasting would be considered performance, not distribution.

[00:31:39] Speaker 01:
It would not be an importation.

[00:31:40] Speaker 01:
Forms of streaming that are more akin to broadcasting, I don't think would be within the

[00:31:45] Speaker 01:
IPC's jurisdiction.

[00:31:47] Speaker 01:
But on a future case, a proper record on the nature of the transactions, applying that straightforward three-part test, I think that one can decide whether or not they're within the purview of the Commission's jurisdiction.

[00:32:00] Speaker 01:
But here where you have digital articles,

[00:32:03] Speaker 01:
that are traded and that are in fact a representation of a physical article that it would be a subject of trade, I think it's quite clear case for the exercise of the Commission's jurisdiction.

[00:32:16] Speaker 01:
And since the term articles is capacious, it just makes no sense to restrict the statute

[00:32:22] Speaker 01:
to deny domestic industry the protections against unfair trade practices and against invasions of intellectual property on the completely irrelevant factor of an imported item's tangibility.

[00:32:36] Speaker 05:
Let me talk about some of your other issues because I think we've had a lot of discussion from the government on this topic.

[00:32:43] Speaker 05:
What evidence is there in the records that CCPK

[00:32:49] Speaker 05:
did anything other than provide a service for ClearCorrect?

[00:32:52] Speaker 01:
Well, first of all, they waived that argument.

[00:32:56] Speaker 05:
But the fact is... It's kind of hard to waive the question of whether or not there is liability as a matter of law.

[00:33:02] Speaker 05:
I mean, you can't have liability in the absence of a sale.

[00:33:07] Speaker 05:
If there's no evidence, there's no evidence.

[00:33:10] Speaker 01:
There is evidence.

[00:33:11] Speaker 01:
And they're essentially an all-requirement supplier of these digital data models.

[00:33:15] Speaker 01:
They don't have other customers.

[00:33:17] Speaker 01:
And as the Supreme Court said in Euridip, a sale does not have to be a conventional transaction, and that you rely on the expertise of the agency here.

[00:33:27] Speaker 01:
And so here, you effectively have, because it's a sole supplier situation, there was cost plus pricing as opposed to unit pricing.

[00:33:35] Speaker 01:
But it's still, what they did was they provided an article

[00:33:38] Speaker 01:
And they were compensated for it, and they made profit on it.

[00:33:42] Speaker 01:
And so even though it's an affiliated trade, it's still trade.

[00:33:45] Speaker 01:
So I think that would be clearly within their purview, even if they hadn't waived the issue.

[00:33:49] Speaker 01:
I think they did waive it.

[00:33:53] Speaker 01:
So I think that there's

[00:33:55] Speaker 01:
clearly hear a sale.

[00:33:57] Speaker 01:
There was also no evidence of actual substantial uses.

[00:34:00] Speaker 01:
All the uses Mr. Myers indicated were ones that were steps in the infringement.

[00:34:05] Speaker 05:
What's the evidence with respect to intent as it relates to CCPK?

[00:34:09] Speaker 01:
Well, first of all, I think the Commission properly applied the expansion rule, which comes from MGM and the Supreme Court, that when there are no substantial infringing uses, you know the patent, you're presumed to know that your products will be infringing.

[00:34:26] Speaker 01:
But they also, they waived that as well.

[00:34:29] Speaker 05:
Was there evidence that CCPK knew of the patent?

[00:34:32] Speaker 01:
They didn't even make a proffer that CCPK had any reliance on the implied license, if that's what the court is asking about.

[00:34:39] Speaker 01:
They put the evidence in CCUS, but none of the relevant seller, which is CCPK.

[00:34:45] Speaker 01:
But I think that in any event, the implied license claim is so contrived that I don't think there could be any good face reliance, and so it would be harmless in any event.

[00:34:55] Speaker 01:
I would like to address the question of the Bayer case because I don't think that has come up.

[00:34:59] Speaker 01:
And I think that that is distinguishable on four grounds.

[00:35:03] Speaker 01:
First of all, Bayer was addressing, it was started from the proposition agreed to by the parties in that case.

[00:35:10] Speaker 01:
that if the term products made in 271G meant products manufactured, then the article necessarily had to be physical.

[00:35:19] Speaker 01:
And the court reserved the question about what the meaning of 337 was because

[00:35:25] Speaker 01:
The terms there are much broader as made, produced, processed, or mined.

[00:35:30] Speaker 01:
Second of all, Bayer did not attempt a plenary construction of 337, did not take into account, for example, the copyright jurisdiction, and by 1988 it is clear that copyright applied to electronic works.

[00:35:46] Speaker 01:
Third, even if there were a construction of 337 in buyer, it's not binding on the commission under brand X, because it's not based on the plain language of 337.

[00:36:00] Speaker 01:
And fourth, I think that your points are correct to draw the distinction even under 271G, that if a product is created by a process as opposed to just merely discovering information or transmitting information, it's within the purview of 271G.

[00:36:16] Speaker 01:
So I think the buyer does not control this case.

[00:36:19] Speaker 01:
The commission deserves deference.

[00:36:21] Speaker 01:
And what the commission properly did is reject an interpretation that would create gaping loopholes in the statute and invite evasion.

[00:36:30] Speaker 01:
Evasion through widespread electronic piracy of copyrighted works and through the kind of sham arrangement that the ALJ found was devised here to

[00:36:42] Speaker 01:
to avoid liability because what ClearCorrect cannot do, having been subject to a consent order that arose from importation of physical goods, is try to defeat IPC jurisdiction by importing infringing digital goods that can be readily converted.

[00:37:00] Speaker 05:
Isn't there just enough opportunity for you to enforce the patent law through your actions in Texas?

[00:37:09] Speaker 01:
Yes, but the remedy is here.

[00:37:11] Speaker 01:
And I think it's important to note, when you have a broad substantive prohibition, Congress would often expand the remedies to fully vindicate that prohibition and the rights and duties.

[00:37:23] Speaker 01:
And it really makes no sense to suggest that the substantive prohibition is somehow restricted by the original grant of remedies, even though those have been expanded.

[00:37:34] Speaker 01:
And I think the consent decrees

[00:37:36] Speaker 05:
with the language of the consent decree as it may be in lieu of an exclusion order, and even if the impetus of the legislative history was... But again, this is not a circumstance like in Suprema where the argument was made that if you can't get the person who's doing the importing, who is sending it into the country, that somehow there's a gap in the statute and that there's a porous border.

[00:37:59] Speaker 05:
Here you have a situation where, according to your argument, it's clear correct that that is using CCPK and that all of that activity is completely actionable in the United States.

[00:38:12] Speaker 05:
You don't have any gap in the statute or coverage.

[00:38:15] Speaker 01:
But I think the statutory, most of the ITC's jurisdiction is going to be

[00:38:23] Speaker 01:
going to be concurrent with the district courts.

[00:38:25] Speaker 01:
I don't think that excludes it.

[00:38:27] Speaker 01:
And the district court jurisdiction did not arise until 1994.

[00:38:30] Speaker 01:
So certainly, after 1988, when you had it in 1974, since you've had this consent decree authority and the provisions enacted, I think the commission's interpretation is certainly reasonable.

[00:38:41] Speaker 06:
OK.

[00:38:42] Speaker 06:
Thank you.

[00:38:44] Speaker 06:
We'll move it up to five minutes on rebuttal to try to keep the time a little more even if you need it.

[00:38:53] Speaker 02:
Your Honor, first off, I think the Commission may have some confusion about what is actually transmitted from server to server.

[00:39:06] Speaker 02:
They were talking about a digital replication of the item that is sold in commerce.

[00:39:15] Speaker 02:
But that's not this case.

[00:39:18] Speaker 02:
The way this process works and their claims are written

[00:39:23] Speaker 02:
is you have a digital model of someone's teeth in crooked position.

[00:39:29] Speaker 02:
And then in the straight position, you have another model.

[00:39:34] Speaker 02:
And then you come in and you gap fill the intermediate positions to move from position A, crooked teeth, to position Z, straight teeth.

[00:39:44] Speaker 02:
What you do with the digital models is you send them to a machine.

[00:39:50] Speaker 02:
And that makes a physical model, and it's very simply a matter of thermoforming a plastic material on the top.

[00:39:57] Speaker 02:
So the information that is sent from the Pakistani server to the server in the United States is not what is ultimately sold to the doctor or the patient.

[00:40:11] Speaker 02:
bits and bytes of data that a machine uses to make a mold.

[00:40:16] Speaker 02:
And then the plastic is thermoformed on top of the mold.

[00:40:20] Speaker 02:
And then that plastic is the item that actually goes to the patient and is put in their mouth.

[00:40:25] Speaker 02:
So when the commission found, again in bold and italics, that these were merely instructions that had no separate commercial value, it is a very far cry from being the physical product

[00:40:41] Speaker 02:
that people buy to wear in their mouth to straighten their teeth.

[00:40:44] Speaker 02:
So I think there was some confusion on behalf of the Commission on how far we are.

[00:40:49] Speaker 02:
The data coming in is two or even three steps removed because the data has to get treated once it arrives in the US before it can even go to the machine to make the physical models that are then used to make the aligners.

[00:41:05] Speaker 02:
Now, there was a lot of discussion about

[00:41:10] Speaker 02:
where lines need to be drawn, what type of streaming information would go to the commission, what type of streaming information might not be within the commission's jurisdiction.

[00:41:22] Speaker 02:
But this court in Bayer, and the Supreme Court in AT&T versus Microsoft, and I believe it may have been Judge Amal in your dissent yesterday, there were great discussions about why expansion of these statutes has to be left to Congress.

[00:41:38] Speaker 05:
dissent doesn't get you very far, unfortunately.

[00:41:44] Speaker 02:
But well reasoned nonetheless.

[00:41:46] Speaker 02:
And here, what the Commission has done is it has unilaterally expanded the scope of its own power many times.

[00:41:57] Speaker 02:
The problem that occurs with a

[00:42:00] Speaker 02:
judicial opinion that just says affirmed is that there are a lot of issues here that are very difficult.

[00:42:06] Speaker 02:
I mean, this courtroom is probably chock-a-block full of those, all those amici who have their competing interests.

[00:42:12] Speaker 02:
But more, let's look at the Petri dish we have just in this case.

[00:42:16] Speaker 02:
We've got the violation premised on some people in Pakistan who are writing some bits and bytes of data and sending it from a server there to a server in Texas.

[00:42:26] Speaker 02:
And that's the violation.

[00:42:29] Speaker 02:
But those Pakistani technicians could have just logged straight onto the server in Texas.

[00:42:36] Speaker 02:
And then we would not have any argument of an importation of digital data sets.

[00:42:41] Speaker 02:
And they would be hard pressed to even find the importation of an individual keystroke.

[00:42:46] Speaker 02:
So the points made in Bayer and AT&T versus Microsoft and the one yesterday is well taken.

[00:42:53] Speaker 02:
And you brought it up in your discussion previously.

[00:42:58] Speaker 02:
is Congress has a lot of balls in the air about what we're going to do with this streaming information.

[00:43:05] Speaker 02:
And when it decides these issues like, well, could the Pakistanis just log on to a US server, they're going to have their hearings and their evidence and their lobbyists and bills and draft bills, amendments, all that good stuff to come up with a rule that we can work with and all live by, hopefully.

[00:43:24] Speaker 02:
And so the point is well taken that

[00:43:27] Speaker 02:
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, and all the judicial opinions to that point are very astute.

[00:43:43] Speaker 06:
We thank you.

[00:43:44] Speaker 06:
Before we close the case off, the panel would like to request

[00:43:49] Speaker 06:
that within ten working days each side submit no more than ten pages, double spaced, on what if any impact our opinion or our mock opinion yesterday in Suprema has on the issues in this case.

[00:44:07] Speaker 06:
If the answer is none, feel free to just say that and not use your 10 pages.

[00:44:12] Speaker 06:
But we'd appreciate getting that information.

[00:44:16] Speaker 06:
Does that meet everyone?

[00:44:17] Speaker 06:
So it's 10 pages for either side.

[00:44:19] Speaker 06:
You all may want to divide that or do the same one or whatever.

[00:44:24] Speaker 03:
In what form would the report like?

[00:44:25] Speaker 03:
A letter?

[00:44:26] Speaker 06:
A letter would be fine.

[00:44:28] Speaker 03:
28A?

[00:44:29] Speaker 06:
Yes.

[00:44:31] Speaker 06:
Thank you.

[00:44:32] Speaker 06:
We thank all counsel and the case is submitted.