Article: Patent Infringement in the Digital Age: How a Dispute About Tooth Aligners Led to a Fight About the ITC’s Jurisdiction over Electronic Transmissions

The International Trade Commission (“ITC”) is an “independent nonpartisan agency that investigates and reports to the President and Congress on matters concerning import trade, tariffs and trade agreements.” Shewmaker v. Parker, 479 F. Supp. 616, 618 (D.D.C. 1979). Established in 1930 as the U.S. Tariff Commission, the ITC has broad investigative authority over matters of international trade, including regulating the importation of goods into the country. Among its responsibilities is to serve as a forum for intellectual property owners to petition to prevent the importation of products that infringe their rights. Last year, the ITC made the following statement:

“‘[I]mportation . . . of articles’ should be construed to include electronic transmission of digital data because the digital data sets at issue in this investigation are true articles of international commerce that are imported into the United States and their inclusion within the purview of section 337 [of the Tariff Act] would effectuate the central purpose of the statute.”—United States International Trade Commission, In re Certain Digital Models, Digital Data, and Treatment Plans for Use in Making Incremental Dental Positioning Adjustment Appliances, the Appliances Made Therefrom, and Methods of Making the Same (Apr. 9, 2014).

This sentence turned an otherwise typical patent infringement dispute about orthodontic appliances into a fierce debate about the authority of the ITC over electronic transmissions of information into the U.S. How did a patent case about tooth aligners turn into a debate that some said called into question the future of an open and free internet, the effectiveness of copyright protection in the film, music and publishing industries and, ultimately, the ITC’s authority to prevent transmission into the U.S. of information that infringes, or could be used to infringe, the intellectual property rights of U.S. businesses?

How Did We Get Here?
Align Technology, Inc., (“Align”) is a medical device company that that specializes in clear tooth alignment products, including the Invisalign orthodontic system. ClearCorrect Operating LLC (“ClearCorrect”) like Align, develops clear, removable alignment devices under the ClearCorrect brand. Align and ClearCorrect’s products are quite similar: both reposition teeth gradually through a series of aligners that a patient wears in succession until the desired positioning is achieved. Their dispute before the ITC centered on ClearCorrect’s use of digital data sets—three-dimensional models of the desired positions of patients’ teeth at different stages of orthodontic treatment—to construct the aligners. Specifically, ClearCorrect would scan a physical model of patients’ teeth, and send the scan to its overseas affiliate (“CCP”) in Pakistan. CCP would then use software to design schematics of the teeth in each incremental stage of the alignment process, and would transmit the data sets for those aligners back into the U.S. to ClearCorrect electronically. ClearCorrect would then 3D-print physical models of the schematics, and aligners would be made by molding plastic over the models. Align petitioned the ITC alleging that the activities of CCP in transmitting the data back to the U.S. violated Section 337 of the Tariff Act of 1930, namely that it led to the infringement of Align’s patents.

Before reaching the substance of Align’s claims, the administrative law judge (“ALJ”) overseeing the dispute was faced with the threshold question of whether the ITC had authority to remedy CCP’s allegedly wrongful conduct. Specifically, the ALJ had to determine whether CCP’s electronic transmission of the data that ClearCorrect used to build its aligners constituted “importation of . . . articles” within the meaning of Section 337. The ALJ found that digital data was indeed an “article” under Section 337, and found CCP in violation of Section 337 on a subset of the patents at issue, recommending that the ITC issue a cease-and-desist order against further transmission of the data sets.

Following both parties’ petitions for review (ClearCorrect was not found to infringe on a number of the patents), the ITC determined to review the ALJ’s finding in its entirety, and requested public comment regarding whether “articles” could properly be construed to include the intangible data sets at issue. A number of organizations submitted comments to the ITC, including Google (against such a construction), and the Motion Picture Association of America (“MPAA”), the Association of American Publishers (“AAP”), and Nokia (in favor of such a construction).

Ultimately, the ITC affirmed the ALJ’s finding. After considering the Tariff Act’s statutory text, legislative history, principles of statutory construction, comparisons to other agencies’ treatment of digital data, and policy concerns, it concluded that, although a “difficult question,” the term “articles” covers digital data. Commission Opinion at 36. ClearCorrect appealed the ITC’s decision to the Court of Appeals for the Federal Circuit. That appeal (Case No. 14-1527) is currently pending and has drawn, in addition to briefing from the parties, amicus curiae submissions from a number of organizations, including the Business Software Alliance (“BSA”), the Internet Association, Public Knowledge and the Electronic Frontier Foundation (“EFF”) (in opposition to the ITC opinion); and Nokia, the AAP, the MPAA and the Recording Industry Association of America (“RIAA”) (in support of the ITC opinion).

The Federal Circuit Appeal
ClearCorrect argued in its brief on appeal that not only was the ITC wrong, but the question of whether “articles” includes digital data had already been decided—in Bayer AG v. Housey Pharmaceuticals, Inc., 340 F.3d 1367 (2003). Dkt. 31, at 9. In Bayer, the Federal Circuit considered whether 35 U.S.C. § 271(g)—a companion statute to Section 337—reached non-physical goods. 340 F.3d at 1368. In so doing, the Federal Circuit ruled that “section 271(g) was intended to address the same ‘articles’ as were addressed by section 1337.” Id. at 1374. It therefore reviewed the legislative history of Section 1337, and concluded that, “Congress was concerned solely with physical goods that had undergone manufacture,” and “nothing in the legislative history [of Section 337] suggest[s] that Congress was concerned that the pre-existing statutory scheme failed to reach intangible information.” Bayer, 340 F.3d at 1373-74. According to ClearCorrect, Bayer was dispositive.

ClearCorrect also noted that none of the dozen amendments to the Tariff Act since 1930 gave any indication that Congress intended to include intangible information within the ITC’s authority. Id. at 113-14. It also argued that Congress’s explicit exclusion of electronic transmissions from the enforcement authority of U.S. Customs and Border Protection (“Customs”) meant that Congress could not have meant the ITC to have the same power, since the ITC’s primary remedial power was an exclusion order to be enforced by Customs. Id. at 15. Further, ClearCorrect argued that, to the extent the ITC’s inability to reach electronic transmissions reveals a flaw in the statutory scheme, Congress was in the best position to remedy that flaw. Id. at 16.

The Internet Association, whose members include companies such as Amazon, Facebook, Google, Netflix, Twitter and Yahoo!, echoed ClearCorrect’s arguments. See Dkt. 42. It also argued that the ITC’s lack of remedial tools against electronic transmissions meant that Congress could not have intended for the ITC to have authority over them. Dkt. 42 at 9. Specifically, it argued that the ITC’s core remedy was an exclusion order which, by definition, could not be enforced against electronic transmissions. Dkt. 42 at 23-25. And because the ITC’s other remedy—a cease-and-desist order—was only available as a supplement or alternative where an exclusion order was available, there was no remedy that the ITC could provide against electronic transmissions. Id.

The BSA, whose members include major tech companies such as Adobe, Apple, Dell, IBM, Microsoft, Oracle, and others, concurred with ClearCorrect and the Internet Association’s arguments. It further argued that Congress knew that electronically transmitted information existed as early as the 1930s, and that Congress entrusted regulation of such information to the Federal Communications Commission, not the ITC. Dkt. 43 at 14. It also argued that, notwithstanding the remedial purpose of Section 337, the ITC has a statutorily limited function—to “deal with unfair competition in the importation of tangible goods, not to prevent all intellectual property violations regardless of origin.” Id. at 5. That role, BSA argued, is reserved for the district courts, which are perfectly capable of protecting intellectual property rights where the ITC cannot. Id. at 5.

Align and the ITC, of course, disagreed. Align argued that that the text of the Tariff Act directly supported the ITC’s construction of the term “articles.” Dkt. 56 at 7. Looking to the dictionary definition of the term at the time the Tariff Act was passed, and the use of the term in conjunction with other words such as “importation” and “sale,” Align argued that “article” included any items that are bought and sold in commerce. Id. at 9, 12-13. Align dismissed as irrelevant the existence of electronic transmissions in 1930, as no commercial trade in such transmissions existed at the time. Id. at 15. It also rejected the notion that Congress intended to lock the ITC’s authority in time, such that it would lose its authority to prevent importation of infringing products based solely on changes in the technology used for importation. Id. at 16. Align noted that the ITC’s interpretation was in line with the Department of Labor and U.S. Court of International Trade’s refusal to read a “tangibility requirement” into other comparable statutes. Id. at 19-20. It also distinguished Bayer on the grounds that Section 337 was not at issue in the case, that Bayer concerned only abstract information, not digital schematics, and that the Federal Circuit noted in a footnote that the language of section 337 “suggests a broader scope for section 337 than for section 271(g).” Id. at 28-30. The ITC joined in a number of these arguments and further noted that a broad construction of the term “articles” was consistent with “Congress’s declared intention” that section 337 be “broad enough to prevent every type and form of unfair practice.” Dkt. 55 at 25.

Does the Copyright Act Necessitate the ITC’s Exercise of Authority over Digital Transmissions?
The MPAA and RIAA together, and the AAP separately, submitted briefs in support of the ITC opinion, arguing—in addition principles of statutory construction, legislative history, and deference to the ITC—that there was much more at stake than a simple patent dispute between Align and ClearCorrect. They argued that ruling against the ITC “could effectively read copyright protection out of Section 337 because electronic transmission is the mode by which most unauthorized copyrighted works are imported into the United States.” Dkt. 77 at 3. According to the MPAA and RIAA, the term “articles” cannot be interpreted without taking into account the “realities of the marketplace.” Id. at 13-14. That reality, in the film and music industries, is that “electronic transmission of copyrighted electronic works has become the predominant form of distribution.” Id. AAP expressed similar concerns with respect to the publishing industry, noting the increasing popularity of eBooks (whose sales increased by almost 4,500% since 2008). Dkt. 73 at 18. As the AAP noted, quoting the U.S. Copyright Office’s DMCA Section 104 Report, “time, space, effort and cost no longer act as barriers to the movement of copies [of copyrighted works], since digital copies can be transmitted [via the Internet] nearly instantaneously anywhere in the world with minimal effort and negligible cost.” Id. at 19. Thus, for the AAP, MPAA and RIAA, the inability of the ITC to restrict the importation of electronic transmissions—which include books, movies, and music—would render Section 337’s copyright protections toothless. Dkt. 77 at 3.

The AAP, MPAA and RIAA thus argued for a policy favoring broad ITC authority. But policy considerations do not necessarily dictate statutory interpretation. It may not matter how strong the argument is that the ITC should be able to restrict importation of digital transmissions, or how problematic the outcome would be if it could not, if the Federal Circuit finds that the statute, as drafted, places digital data outside of the ITC’s reach. In that event, the responsibility for fixing problematic legislation is for Congress, not the courts.

Are Intellectual Property Rights in the United States in Jeopardy if the ITC Lacks Authority over Digital Data?
Nokia also argued in support of the ITC, noting its investment of “EUR 50 billion in research and development relating to mobile communications,” and its need for assurance that “past, present and future substantial research and development efforts are fully protected from infringing imports.” Dkt. 74 at 1-2. According to Nokia, a finding limiting the ITC’s authority to tangible media could “gravely damage the protection of valid patent rights” because many modern patents “require both hardware and software components in order to complete the patented product or a product capable of performing a patented method.” Id. at 15. If the ITC had no authority over electronic transmissions, Nokia argued, bad actors could simply import hardware without the software installed, and then electronically transmit the software once the hardware is in the U.S. to complete the infringing product. Id. Nokia argued that would be “wholly contrary to the remedial purpose of Section 337,” and therefore Congress could not have intended such a gap in the ITC’s authority, because essentially it would render Section 337 meaningless for such patents. Id. at 16.

It remains to be seen how persuasive the Federal Circuit will find Nokia’s argument, given that any such “gap” in intellectual property enforcement, as Nokia described it, could be dealt with in the U.S. federal courts. Indeed, Align itself pursued a concurrent federal action involving the same patents.

Is ITC Authority over Digital Transmissions a Danger to a Free and Open Internet?
Public Knowledge and EFF together submitted a brief expressing concern that the ITC’s opinion left unanswered the question of “whether all transmissions of telecommunications data are within the scope of its authority.” Dkt. 43 at 3. In their view, the ITC has no jurisdiction over telecommunications data transmissions and its “manufacturing of new powers over data transmission” was cause for concern because the ITC did not indicate any “limiting principles” on its power. Public Knowledge and EFF therefore argued, in addition to certain historical and statutory arguments also made by others, that Section 337 “ought not cover telecommunications.” Id. at 3-4. First, they argued that counting data transmissions as imported articles could result in “conflicting legal burdens” for internet service providers. Id. at 4, 12. Specifically, they raised the specter that internet service providers would be forced into an enforcing role that Congress never intended, noting that the ITC conceivably could require internet and other telecommunications providers to “actively block transmission” of content. Id. at 13. This, they argued, conflicted with the Electronic Communications Privacy Act’s prohibition on intentional interception of electronic communications and the Digital Millennium Copyright Act’s (“DMCA”) safe harbor from copyright liability for online service providers. Id. at 14. Second, they noted the importance of an open internet to society and argued that mere threat of a cease-and-desist order from the ITC would have a chilling effect, causing “service providers to refuse carriage of new and innovative services, block access to data, and otherwise restrain an open and unfettered arena of technological growth.” Id. at 17.

For Public Knowledge and EFF, the ITC’s “fail[ure] to indicate any outer limit” or any “limiting principles on the scope of the Commission’s authority” over digital transmissions required reversal. Id. at 18. The dispute between Align and ClearCorrect implicated more than just tooth aligners—”[t]he digital models of patients’ teeth at issue were, at base a series of bytes, or numbers, sent over a communications channel to be interpreted by a computer as a three-dimensional model.” Id. at 19-20. But so are voice-over-IP telephone calls, television transmissions and radio broadcasts, over which, according to Public Knowledge and EFF, Congress never intended the ITC to have jurisdiction. Id. at 20. That the ITC’s opinion could be read to the contrary, they argued, “necessitates this Court’s clarification of the proper scope of the Commission’s jurisdiction.” Id. at 20.

Where Do We Go from Here?
As of the date of this article, the Federal Circuit appeal remains pending. Further briefing is expected from ClearCorrect, and possibly others, with oral argument expected this summer and a decision in the fall. Ultimately, the Federal Circuit will have to decide whether the ITC’s authority to issue an exclusionary or cease-and-desist remedy against “importation . . . of articles” includes electronic transmissions of digital data. Its decision could have a significant impact on anyone transmitting data into the United States