Page 30 - AVN February 2016

LEGALESE | | By Clyde DeWitt
decision that is
very relevant to
”The recent
this industry
arises from a
No Patent on Electrons
International Trade Commission can’t stop piracy
after unfair trade practices, such as subsidies, dumping, and
infringement of patents, trademarks, and copyrights, emanating
from other countries. Like other commissions, it has a number
of commissioners, no more than a simple majority of which can
come from the same political party.
The recent decision that is very relevant to this industry
arises from a dizzying set of facts involving patent infringement.
Importation of items that infringe a patent can be stopped by
the ITC.
The subject patent—don’t even try to understand it—had
something to do with fixing crooked teeth. How it worked was
that teeth would be examined in the United States; the digital
data sent to Pakistan; someone there would undertake the
process of designing the custom teeth-straightening device;
and then the design would be transmitted over the internet
dizzying set of
facts involving
patent
infringement.
Importation of
items that
infringe a patent
can be stopped
by the ITC.
to the United States, where it would be used to manufacture
the teeth-straightening gadget, which would be applied to the
LEGAL NEWS
Clyde DeWitt is a Las Vegas and Los Angeles
attorney, whose practice has been focused on adult
entertainment since 1980. He can be reached at
ClydeDeWitt@earthlink.net. More information can
be found at ClydeDeWitt.com. This column is not a
substitute for personal legal advice. Rather, it is to alert
readers to legal issues warranting advice from your
personal attorney.
30 | AVN.com | 2.16
Before delving into this month’s topic, a quick note concerning
the topic in the December issue is warranted. The topic of that
column was a very important Supreme Court case involving
arbitration. The decision now has come down, and the Court
again has ruled in favor of arbitration and against California.
The subject arbitration provision said that all disputes between
the customers and DirecTV would be settled by arbitration
unless the arbitration clause was invalid under the law of
the customer’s state, which in this case was California—
where courts had a penchant for throwing out arbitration
clauses as unfair and had so held in this case. Once again, the
Supreme Court sullied the California cases, holding that the
Federal Arbitration Act was the law of the land, including of
California; and California could not overrule it.
The moral of the story is that, if you have an arbitration
agreement with your customers that is properly drawn
(meaning by an experienced lawyer, rather than copying
someone else’s), you can prevent expensive litigation,
including class actions. This is good for businesses, especially
strip clubs. DirecTV, Inc. v. Imburgia, ___ U.S. ___, 2015 WL
8546242 (December 14, 2015).
Now, this month’s topic comes from the United States
International Trade Commission. (The what?)
The reason this is important is that the subject decision has
the effect of ruling that the ITC can stop importation of pirated
movies only if they are physical objects, such as DVDs. It has
no jurisdiction over internet piracy, which is where most of it
arises.
There probably is a good-size universe of lawyers who
have no idea what the ITC is or what it does; so don’t feel so
bad if you don’t. The ITC is a commission, like the Federal
Communications Commission, the Securities and Exchange
Commission and the one you probably know about, the
Federal Trade Commission. Commissions are created by
Congress. They are quasi-judicial bodies that act as prosecutor
and judge in matters over which they have jurisdiction. Just
as the FTC goes after unfair trade practices in the United
States like dating sites with fake profiles, the ITC, amongst
its other responsibilities involving international trade, goes
patient’s teeth. Got it?
The ITC’s claim was that the process undertaken in Pakistan
was found to infringe the subject patent. (Recall that a patent
can be on either a device or a process.) Now, there is no
question that, had the patent-infringing process together with
the manufacture of the physical teeth-straightening device
taken place in Pakistan, the ITC could have blocked the import
of the physical teeth-straighteners. That is because the product
would have been manufactured by a process that infringed the
patent; and selling such a product likewise infringes the patent.
What the ITC was trying to do here was to stop the company
in Pakistan from transmitting the data to the United States.
The problem was that the ITC’s enabling statute allowed the
Commission to go after “unfair methods of competition and
unfair acts in the importation of articles ....” After the hearing,
the Commission found that there was no difference between
importing the design for the teeth-straightener and importing
the item itself. Accordingly, the Commission ruled against the
Pakistan company.
The Pakistan company appealed to another place of which
you may not be aware, the United States Court of Appeals
for the Federal Circuit. The Federal Circuit, which covers
the entire United States, primarily handles federal appeals
involving patents. However, it is also responsible for some other
specialized appeals, including those from ITC rulings.
In a convoluted opinion essentially finding that electrons
over the internet are not “articles,” the Federal Circuit reversed.
Largely relying on dictionaries, the court essentially found
that the ITC only has jurisdiction over importation of three-
dimensional objects. ClearCorrect Operating, LLC v. International
Trade Com’n, 2015 WL 6875205, ___ F.3d ___ (Fed. Cir.,
November 10, 2015).
Likely, the case isn’t over. Like other circuits, the Federal
Circuit allows for rehearing, either by the same three-judge
panel that decided the case or the entire panel of judges.
Moreover, Supreme Court review is available. Notably, the
Supreme Court has been very hostile to the decisions of the
Federal Circuit in recent years.
Unless the result is overturned, however, the ITC will be
powerless to stop offshore internet piracy. Look for Hollywood
to jump into the fray.