/>iOn November 10, 2015, the Federal Circuit held that the International Trade Commission’s (“ITC”) jurisdiction over the importation of “articles that infringe” does not cover the “electronic transmission of digital data.”[1] The 2-1 panel decision is over 50 pages long, includes a concurring and dissenting opinion, and centers around the meaning of “articles” in Section 337 of the Tariff Act, 19 U.S.C. § 1337(a). The broader technology and entertainment industries watched this case closely because some believe the ITC should be a venue for combating online piracy of films, music, and books; however, the Federal Circuit seemingly rejected that possibility.
The ITC instituted the underlying investigation based on a complaint filed by Align Technology, Inc. (“Align”), the developer of the Invisalign teeth-straightening system, alleging infringement of various claims of seven different patents directed to the production of orthodontic appliances, also known as aligners. The aligners are configured to be placed successively on the patient’s teeth and to incrementally reposition the teeth over a period of time.
The respondents, ClearCorrect Operating, LLC (“ClearCorrect U.S.”) and ClearCorrect Pakistan (Private) Ltd. (“ClearCorrect Pakistan”), have operations in the U.S. and Pakistan, respectively, and produce aligners. Align generally argued that the following process infringes those claims: 1) ClearCorrect U.S. scans physical models of patients’ teeth to generate digital recreations; 2) the digital recreations of teeth are electronically transmitted to ClearCorrect Pakistan; 3) based on the digital recreations of teeth, ClearCorrect Pakistan develops digital models of aligners; 4) ClearCorrect Pakistan electronically transmits the digital models of aligners to ClearCorrect U.S.; and 5) ClearCorrect uses the digital models of aligners to ultimately manufacture in the U.S. incremental aligners for patients. The accused “articles” that are imported into the United States are electronic (intangible) data, which represent virtual three-dimensional models of the desired positions of the patients’ teeth at different stages of treatment.
The ITC found in a final determination that the imported digital data constituted an “article” within the meaning of Section 337 and issued a cease-and-desist order against ClearCorrect.[2] An appeal to the Federal Circuit followed.
The case drew a number of amicus briefs on both sides of the issue. Open-internet advocacy groups such as the Internet Association (members include Google and Amazon) and the Electronic Frontier Foundation filed amicus briefs pressing the Federal Circuit to reject the ITC’s broader construction of the term “articles” that included digital files. On the other hand, the Association of American Publishers, the Motion Picture Association of America and the Recording Industry Association of America, all of which have an interest in combating electronic piracy, supported the ITC’s jurisdiction over digital media.
Chief Judge Prost filed the majority opinion for the Court. In reversing the ITC’s decision, the Court concluded that the ITC does not have jurisdiction over the case and explained that construing “articles” to cover digital data runs counter to the expressed intent of Congress. “Articles,” according to the Court, means “material things,” whether when looking to the literal text of the statute or when read in context with the overall statutory scheme. Furthermore, the ITC’s interpretation of the term “articles” was unreasonable and did not warrant deference. Yet Judge Prost suggested that the ITC would have jurisdiction over the case if ClearCorrect had imported its digital data on a physical medium such as a compact disk or a thumb drive.
Judge O’Malley explained in a concurring opinion that, if Congress intended for the ITC “to regulate one of the most important aspects of modern-day life, Congress surely would have said so expressly.” Judge Newman, in a forceful dissent, argued that the ITC should have jurisdiction over digital data because of, among other things, “evolving technologies of the Information Age.”
The decision will likely please technology companies such as Google and Amazon who oppose the ITC’s efforts to regulate the flow of digital data. But the Federal Circuit dealt a blow to the music, film, and publishing industries, which will refocus their efforts to stop the importation of pirated works in a different forum, namely the U.S. District Courts. Indeed, a parallel lawsuit between Align and ClearCorrect remains pending in the U.S. District Court for the Southern District of Texas.
Given the broad implications of the Federal Circuit’s decision, and the three separate opinions by Judges Prost, O’Malley, and Newman, a petition for hearing en banc is expected.
[1] ClearCorrect Operating, LLC v. Int’l Trade Comm’n, No. 2014-1527(Fed. Cir. Nov. 10, 2015).
[2] In re Certain Digital Models, Inv. No. 337-TA-833 (Apr. 3, 2014).
