ITC: Jurisdiction over Digital Data Dustin Johnson Haynes and Boone, LLP Phone: 1-972-739-6969 dustin.johnson@haynesboone.com January 26, 2015 © AIPLA 2016

ITC Subject Matter Jurisdiction 19 U.S.C. § 1337(a)(i) authorizes the ITC to investigate and remedy importation, sale for importation, or sale after importation of articles that Infringe a valid and enforceable US patent; Are made, produced, processed using a patented process; [or] Infringe a valid, enforceable, and registered US copyright or trademark; ClearCorrect Operating, LLC v. ITC, No. 2014-1527, (Fed. Cir., Nov. 10, 2015). Digital Data: data that represents other forms of data using specific machine language systems that can be interpreted by various technologies. © AIPLA 2016

ITC Investigation: Certain Digital Models, Inv. No. 337-TA-833 Align Technologies developed Invisalign clear aligners. Applied for and obtained patent protection for its products. © AIPLA 2016

Invisalign Process 1. Invisalign scans physical models of the patient’s teeth and creates a digital re-creation of the patient’s initial tooth arrangement. 2. Invisalign manipulates each tooth position to create a final tooth position. 3. Invisalign creates digital data models of intermediate tooth positions. These digital data models correspond with incremental aligners. 4. An “aligner” is manufactured by thermoplastic molding using a physical model. © AIPLA 2016

Along comes ClearCorrect – markets clear aligners. © AIPLA 2016

ClearCorrect Process 1. ClearCorrect US (“CUS”) scans physical models of the patient’s teeth and creates a digital re-creation of the patient’s initial tooth arrangement. 2. CUS electronically transmits the digital re-creation to ClearCorrect Pakistan “CP”. 3. CP manipulates each tooth position to create a final tooth position. 4. CP creates digital data models of intermediate tooth positions. These digital data models correspond with incremental aligners. 5. CP then transmits these digital data models electronically to CUS. 6. CUS 3D prints these digital models into physical models. 7. An “aligner” is manufactured by thermoplastic molding using the physical model. © AIPLA 2016

Align Technology sues ClearCorrect in Federal District Court. Align Technology file a complaint at the ITC, and the ITC opens an investigation based on alleged infringement of 7 patents. Section 337: the following are unlawful, and when found by the Commission to exist shall be dealt with, … as provided in this section: (B) The importation into the United States, the sale for importation, or the sale within the United States after importation by the owner, importer, or consignee, of articles that— (i) infringe a valid and enforceable United States patent …. © AIPLA 2016

The “articles” are the transmission of the digital models, digital data and treatment plans, expressed as digital data sets, which are virtual three-dimensional models of the desired positions of the patient’s teeth at various stages of orthodontic treatment. © AIPLA 2016

ITC found after its investigation that: digital models, digital data, and treatment plans that comprise 3-D models are “articles” over which the Commission has jurisdiction ClearCorrect US directly infringed the patent claims, and that ClearCorrect Pakistan contributed to that infringement ITC determined that because ClearCorrect US’s infringement occurred in the U.S., it was not a violation of Section 337. ITC exerted its authority over ClearCorrect Pakistan as a contributory infringer for importing the data models. ITC found that ClearCorrect Pakistan practiced certain method claims in Pakistan and found that the importation of the resulting digital models violated section 337. Issued a cease and desist order regarding importation of the accused articles. © AIPLA 2016

Question on appeal to the Federal Circuit: The ITC has authority to remedy only those unfair acts that involve the importation of articles as described in Section 337. Question on appeal to the Federal Circuit: Does the term “articles” as used in Section 337 include electronic transmission of digital data? The ITC had previously concluded that an article had the meaning of an identifiable unit item or thing that may be traded in commerce or used by consumers. And thus included digital data. © AIPLA 2016

1. Has Congress directly spoken to the precise question at issue? The Court reviewed the Commission’s interpretation pursuant to Chevron (for reviewing an agency’s construction of its statute). Under Chevron, the Court addresses two questions: 1. Has Congress directly spoken to the precise question at issue? - if yes, the inquiry ends. - if no, proceed to question 2. 2. Is the agency’s answer to the precise question at issue based on a permissible construction of the statute? © AIPLA 2016

Question 1. Has Congress directly spoken to the precise question at issue? Relied upon multiple dictionaries, use of “articles” in context, the Tariff Act of 1930 and its legislative history, and use in Section 337. Dictionaries defined articles as “material things” or “articles of food… clothing” and such According to the Court, the only “article” imported was digital data that was transferred electronically, i.e., not digital data on a physical medium such as a compact disc or thumb drive. © AIPLA 2016

ITC has no jurisdiction over electronically transferred digital data. Ultimate Holding The Federal Circuit concluded that congress’s intent was that an article is a “material thing.” The term “articles” does include electronically transferred digital data. ITC has no jurisdiction over electronically transferred digital data. Invisalign has filed request for en banc review – still pending © AIPLA 2016

Judge O’Malley’s Concurrence Concluded there was no reason to even reach Chevron questions “The Commission has concluded that it has jurisdiction over all incoming international Internet data transmissions.” “[i]t is very unlikely that Congress would have delegated the regulation of the Internet to the Commission…” © AIPLA 2016

Judge Newman’s dissent Removal of a remedy against infringing imports, whatever the subject matter, including “a preeminent form of today’s technology,” is a “dramatic withdrawal of existing rights, devoid of statutory support and of far-reaching impact.” Digital data is an article of commerce that did not exist when the Tariff Act was enacted, but Congress cannot have intended to omit later- discovered technology from the definition of “article.” In addition, transmission of software to the United States from a foreign country via the Internet is considered importation within the purview of Customs. It is not justifiable to distinguish between digital data imported via, e.g., a disc or flash drive, from digital data imported via the Internet, in the context of Section 337. © AIPLA 2016

Takeaways A movie being streamed from a foreign server into the U.S. would not be subject to ITC jurisdiction, although enforcement could still be pursued in a federal district court. "This ruling, if it stands, would appear to reduce the authority of the ITC to address the scourge of overseas web sites that engage in blatant piracy of movies, television programs, music, books, and other copyrighted works.” The Motion Picture Assoc. of America (MPAA). "This decision is a big win for the open Internet.” Statement by Public Knowledge, an open internet advocacy group. © AIPLA 2016

Dustin Johnson Haynes and Boone, LLP Suite 4000 2505 N. Plano Road Richardson, TX 75082 Phone: 1-972-739-6969 dustin.johnson@haynesboone.com © AIPLA 2016