Federal Circuit's Ruling In ITC Appeals Case May Set Precedent, Regardless of Outcome, Groups Say

The case, heard Tuesday by a three-judge panel of the U.S. Court of Appeals for the Federal Circuit (see 1508110051), is an appeal by orthodontic device manufacturer ClearCorrect of an ITC ruling last year. The ITC's order prohibited a ClearCorrect affiliate in Pakistan from sending data containing digital molds of patients' teeth to the company's Houston headquarters, due to the alleged infringement on multiple patents held by competitor Align Technology.

The case caught the attention of the technology, film, music, publishing and Internet industries, and groups representing each released statements and filed amicus briefs. Tech and Internet groups expressed support for ClearCorrect, saying expansion of ITC authority into the digital realm could have a negative effect on consumers and Internet users. The New York Times also backed ClearCorrect's position (see 1508100045). Associations representing publishers and film and music production argued for the Federal Circuit to uphold the ITC ruling due to the positive impact they said it could have on regulating pirated material. The sides not only differ on the issue itself, but also the probable outcome of the case based on arguments presented and questions asked by the judges.

Charles Duan, Public Knowledge patent reform project director, told us that he's glad the judges -- Sharon Prost, Pauline Newman and Kathleen O'Malley -- recognized the case went well beyond patents or teeth, and that ClearCorrect General Counsel Michael Myers made that argument apparent. Public Knowledge filed a brief urging the court to reverse the ITC ruling, warning it could inhibit an open Internet. During the argument, Prost questioned ITC attorney Sidney Rosenzweig about the commission's statement that the court shouldn't lose sight that it's hearing a case about teeth. "I don't quite understand how you're trying to cabin what's going on here," Prost said, adding she views the case as standing for an important legal principle. Prost also said that she doesn't see "very many limiting principles" that could apply to future cases if the court ruled in favor of the ITC.

"They were definitely concerned with the arguments the ITC presented," Duan said: "I think [Prost] and the other judges really took it to heart" that the case deals with more than just patents. A significant portion of questions coming from the panel to both ClearCorrect and ITC dealt with the commission's jurisdiction over "articles that infringe," and if the phrase encompasses digital data as well. In its amicus brief, the Internet Association, representing companies such as Amazon, Facebook and Google, argued that digital signals aren't articles that can infringe a patent or that are produced by a patented process. An expansion of ITC authority over signals transmitted into the U.S. "has sweeping implications for the Internet and the ability of companies to operate efficient, dependable global networks," it said.

The American Association of Publishers (AAP), MPAA and RIAA also filed amicus briefs. They sided with the ITC, saying the commission's jurisdiction includes digital commerce and electronic transmissions. "Limiting the ITC's jurisdiction to physical goods would severely undermine the agency's future efficacy, as commerce increasingly occurs over the Internet," MPAA said in blog post Monday.

Oral argument came a day after the entire court issued an en banc opinion siding with the ITC in a case against Suprema, which gave increased deference to the commission over certain patented articles used after import. The court's 6-4 opinion overturned the circuit's initial three-judge opinion, which reversed an ITC exclusion order preventing the importation of fingerprint scanners that allegedly infringed on existing patents. Two of the judges presiding over ClearCorrect's case dissented on the Suprema opinion. During ClearCorrect's initial argument, Prost asked Myers why the additional deference given to the ITC in the Suprema case didn't apply to the current case. Myers said the transmitting of data by ClearCorrect's branch in Pakistan is no different from making a phone call, and the ITC has no authority to regulate phone calls or the receipt of digital information.

Sapna Kumar, a University of Houston Law Center associate professor specializing in patent law, told us Thursday that it bodes well for ClearCorrect that two of three judges hearing its case dissented in Suprema, and that all three judges "really latched onto the fact that this just isn't a case about teeth." She thinks the judges are skeptical of the ITC's argument, "and it's likely we could see a reversal," Kumar said. Duan said the questions posed to the ITC during its argument indicate a possible ruling in favor of ClearCorrect, or the court would at least cabin its ruling, if in favor of the agency, to limit its jurisdiction. "The scope of the case forced the parties to really limit their arguments and that is kind of a win in it of itself," said Duan.

Allan Adler, AAP general counsel, told us that the arguments were "pretty much an even match up," and the ITC "did a fairly good job defending its case." AAP is optimistic about the outcome, Adler said. Although courts are usually rather cautious about granting decisions that broaden the scope of a federal agency's jurisdiction, said Adler, the ruling in Suprema should help the ITC as the Federal Circuit comes to a decision.