ITC Rules Transmitted Data Can Be an IP 'Article'

ITC Rules Transmitted Data Can Be an IP 'Article' Warakorn/Fotolia

In a patent case for the digital age, the International Trade Commission issued a ruling Thursday that establishes infringing products brought into the United States through electronic transmission are deemed “articles” even though they don’t have physical form, and therefore can be banned by the agency.

The ruling, which had been delayed at least four times, came out of a case in which Align Technology Inc., a maker of a clear, almost-invisible teeth-straightening system, had asked the ITC to ban the infringing digital imports of its main competitor, ClearCorrect Operating LLC.

“This is a further validation of Align’s patent portfolio and its efforts to vigorously enforce is intellectual property rights,” said Paul Hastings partner Thomas Counts, who represented Align.

The commission’s opinion has not yet been published, as the parties will first get a chance to redact confidential information. But the document totals 153 pages and carefully considers all the arguments presented, including those submitted by third parties, according to Counts. One commissioner, David Johanson, dissented, saying digital transmissions did not constitute “articles” under ITC statutes, and the agency therefore did not have jurisdiction.

But the rest of the commissioners agreed that the ITC did have jurisdiction to bar imports of digital goods, and they ordered ClearCorrect to stop transmitting the digital data it needs to make its products. It could continue its activities for existing patients, the commission said, but would have to stop all other imports.

ClearCorrect generates digital models of patients’ teeth in its overseas offices and transmits the digital data to its headquarters in Texas, where it uses 3D printers to print the molds that are used to make the teeth-straightening aligners.

The ITC ruled that ClearCorrect infringed five patents owned by Align, and it barred the company from importing the covered products in any form. In lieu of an exclusion order, which covers tangible goods, the ITC issued cease-and-desist orders against ClearCorrect in Houston and in Pakistan. Violation of cease-and-desist orders can result in heavy civil penalties and other actions “the commission deems appropriate.”

The cease-and-desist orders will take effect in 60 days unless President Barack Obama vetoes the decision through the U.S. Trade Commission, something presidents have done rarely.

With the ITC process now resolved, Align may resume its federal court patent infringement case against ClearCorrect in order to recover monetary damages unavailable at the ITC, Counts said.

But ClearCorrect counsel Michael Myers of the Houston firm McClanahan Myers Espey said his client would appeal to the Federal Circuit. “This was always an issue that the federal circuit would have to decide,” he told CorpCounsel.com.

In May, ITC Administrative Law Judge Robert Rogers issued an initial determination that ClearCorrect infringed Align’s patents. The full commission then reviewed the decision, modifying his findings but determining that ClearCorrect did infringe five patents and affirming that the ITC has jurisdiction to rule on digitally transmitted imports.

The commission postponed its ruling several times, largely because it decided to gather public comment on the jurisdiction issue. Major companies and organizations weighed in, including Google Inc., Nokia, the Motion Picture Association of America and the Association of American Publishers, all of which have a major interest and stake in digital technology and transmission of intellectual property online.

Google argued that “articles,” as defined in the statutes governing the ITC, relate only to physical objects, and enforcement bans on electronic transmissions would create problems. Nokia, the MPAA and the AAP countered that the ITC’s jurisdiction must extend to cover electronic transmissions. The MPAA said in a Feb. 3 filing that refusing to block electronic transmissions that originate overseas “would deprive many important U.S. industries of one of the most powerful remedies against international unfair acts available under U.S. law.”

The ITC decision that the agency does indeed have jurisdiction over digital imports, if upheld by the Federal Circuit, will have a major impact on companies and ensures the ITC will maintain power and influence in the future. “It demonstrates that the ITC will remain relevant to the digital economy and is not going to be tied to a 20th-century notion of what industrial trade and commerce entails,” Counts said.

Aarti Shah, a former senior investigative attorney at the ITC who is now a partner at the law firm Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, agreed. “The ITC’s decision reaffirms that the commission has the authority not only to issue relief against the digital importation of infringing products, but also to exercise its jurisdiction broadly, to fashion a remedy that adapts to the realities of today’s marketplace to help companies with a domestic industry to protect their intellectual property,” she said.

The case is In the Matter of 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, 337-833, U.S. International Trade Commission (Washington).

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