ITC’s ClearCorrect Ruling Initially Appears Consistent With Precedent on Electronic Transmissions
The U.S. International Trade Commission ruled Thursday on a patent case with potential implications for the agency’s handling of electronic transmissions. But patent lawyers told us Friday that an initial notice on the ruling indicates there’s been no change in ITC precedent. The ITC ruled that invisible teeth-straightening system manufacturer ClearCorrect violated five of Invisalign manufacturer Align Technology’s patents under Section 337 of the Tariff Act, but didn’t infringe on two others (http://1.usa.gov/1jLh5Ie). ClearCorrect said it plans to appeal.
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The ITC “conceded that the issue of whether data constitutes an ‘article' within its jurisdiction was a difficult one,” said ClearCorrect counsel Mike Myers in a news release. “This issue will obviously be decided on appeal.” Align Technology said in a statement that the ITC agreed with the company “these patent claims are valid, and that ClearCorrect infringes them. ClearCorrect can no longer use Align’s patented process to generate infringing digital data and then simply import that data from Pakistan to print out molds used to make aligners in the U.S."
The ITC issued cease-and-desist orders against ClearCorrect that prohibit the company from transmitting files to the U.S. that it uses to manufacture individual patients’ invisible realignment braces via a 3D printer. The ITC said the digital files are “articles” under Section 337 and their transmission via the Internet constitutes importation into the U.S. The ruling exempts the use of files for existing U.S. patients. The case drew the notice of multiple industry parties, with Google urging the ITC in a filing not to include electronic transmissions in its interpretation of the meaning of “articles” under Section 337 for the purposes of issuing exclusion orders. The Association of American Publishers and MPAA said electronic transmissions should be included in the ITC’s interpretation of “articles” under Section 337, arguing it was necessary to extend the definition because of Internet piracy.
The full impact of the ClearCorrect ruling won’t be clear until the ITC releases its full opinion, lawyers said. “That opinion will explain the ITC’s reasoning, and that will be potentially of a lot more interest,” said Jim Altman, a partner at Foster Murphy who has argued before the ITC.
The ITC’s initial ClearCorrect ruling notice appears to be “consistent with prior ITC precedent,” said Benjamin Levi, a lawyer with McKool Smith who has argued cases before the ITC. That precedent is based on a “handful” of cases over more than a decade in which there has been an issue with the importation of software in connection with the importation of a physical product, Altman said. He said the first memorable case setting a precedent on the issue came in 1998, when the ITC issued a cease-and-desist order against Mentor Graphics to cease importing hardware logic emulation systems and related software components via electronic and other means that violated Quickturn Design Systems-owned patents (http://1.usa.gov/1kxLF6C). In that case, the ITC looked at whether it could go after the importation of an intangible item, Altman said.
The ITC decided it would not issue an exclusion order against Mentor Graphics banning the import of electronic data because it would be too difficult for Customs and Border Protection (CBP) to enforce, but would issue a cease-and-desist order that would prohibit a company’s U.S. division from using the data for commercial purposes, said Altman. The ITC has since made the same ruling in other cases involving electronic transmissions, and based on the initial ClearCorrect ruling notice, “I don’t know that this is any different,” Altman said. “The underlying issue in the initial notice of determination is whether a digital transmission is an article within the meaning of Section 337, so the ITC has authority."
The ClearCorrect ruling will represent a “significant change” only if the ITC provides new guidance that broadens or narrows the scope of its enforcement precedent, Altman said. Levi said he’s interested in whether the ITC will include the digital transmissions in any exclusion order it issues in the ClearCorrect case. “That’s not addressed in this notice issued yesterday,” he said. “That’s an open issue.” The ITC has historically said it has jurisdiction to include digital transmissions within the scope of exclusion orders but in deference to CBP it hasn’t done so, Levi said. CBP “regards that as an import as well, they have just chosen for administrative reasons not to require entry papers for every single set of data coming over the Internet,” Altman said. The case’s significance will also depend on the extent to which the ITC finds the digital transmission and ClearCorrect’s physical products are “tightly tied,” Altman said. “If it’s more of a separate aspect of the case, then this might be a slight broadening of what the ITC has done, mostly because it hasn’t been asked in past cases.”